International Trade & Exchange Rates

Creates opportunities for business growth, increases competition, and provides more consumer choice

How does international trade benefit the world?

goods that cannot be produced domestically

Allows countries to obtain…

goods that can be produced more cheaply from overseas

Allows countries to acquire…

Trade in physical goods

Visible trade

Trade in services

Invisible trade

difference between visible exports and visible imports

Balance of trade/Visible balance

Business deals or actions, such as buying or selling something

Transactions

Value of one currency in terms of another

Exchange rate

Payments are made in another currency

What happens when a business buys goods from other countries?

price of exports fall, so demands for exports rise

Exchange rate falls (exports)

price of imports rise, so demands fall

Exchange rate falls (imports)

price of exports rise, so demands fall

Exchange rate rises (exports)

price of imports fall, so demands rise

Exchange rate rises (imports)

causes uncertainty, businesses can’t predict what will happen in the future. Means that it is difficult to predict demands for exports and cost for imports, making planning difficult.

Affect of varying exchange rates

Many of the resources used are imported

Effect on small businesses

improve customer choice

helps to…

sell of surplus commodities

Provides opportunities for countries to…