International Trade and Exchange Rates

Flashcards related to international trade and exchange rates

International Trade

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

Exports

Goods and services sold overseas.

Imports

Goods and services bought from other countries.

Visible Trade

Trade in physical goods.

Invisible Trade

Trade in services.

Visible Balance (Balance of Trade)

Difference between total visible exports and imports (Exports - Imports).

Exchange Rate

The value of one currency in terms of another.

Depreciation in Exchange Rate

When the exchange rate falls.

Appreciation in Exchange Rate

When the exchange rate rises.

International Competitiveness

The ability of a country or business to offer products and services that meet the quality standards of the international markets at prices that are competitive.

Multinational

A corporation that has factories and other operations in many countries.

Toyota

A Japanese car manufacturer and one of the world's largest multinationals.

Kenya exports

Agricultural products and tea.

Kenya imports

Machinery and transportation equipment, motor vehicles, iron and steel, and plastics.

Primary goods

Raw materials/agricultural products.

Fall in exchange rate (exports)

Impact on exports - Exports rise

Fall in exchange rate (imports)

Impact on imports - Imports fall

Rise in exchange rate (exports)

Impact on exports - Exports fall

Rise in exchange rate (imports)

Impact on imports - Imports rise

Alumburg

A growing producer of aluminum products based near Johannesburg.

Extrusion

A production process that shapes material by forcing it to flow through a shaped opening in a die.

Open Economy

An economy that freely engages in international trade.

Impact of falling value of rupee (exports)

Indian exporters benefit, price of exports falls and demand should increase.

Impact of falling value of rupee (imports)

Indian importers lose because purchases are more expensive.

Exchange rate uncertainty

Causes companies to be unable to predict demand for exports and costs for imports, making planning and budgeting difficult.

South African Exports

Gold, platinum, coal and diamonds.

South African Imports

Machinery, foodstuffs, chemicals, petroleum products and scientific instruments.

Effects of a sharply falling exchange rate over a long period on exporters

Exporters sell goods more cheaply--positive impact on the economy, higher employment, income, and tax revenues.

Effects of low exchange rates on imports

Import prices rise, consumers pay more for overseas goods and holidays abroad, businesses meet the rising cost of imported raw materials and components.

Purpose of Exchange Rates

To facilitate transactions between countries with different currencies.

Effect of sustained fall in the exchange rate

Improves the international competitiveness of a country.

Advantage for Countries in International Trade

Countries can obtain goods that cannot be produced domestically.

Advantage for Countries in International Trade

Countries can obtain goods more cheaply from overseas.

Advantage for Countries in International Trade

Provides opportunities for countries to sell off surplus commodities.

Benefit of international trade for Alumburg

Allows them to grow sales overseas, particularly in Europe.

The Nature of International Trade

Creates opportunities for business growth and increases competition

What is the effect of fall in exchange rates?

Price of Exports falls and demand should increase

What is the effect of rise in exchange rates?

Price of Imports rises and demand decreases

Main Customers for Kenya's exports

The Netherlands, Pakistan, Tanzania, Uganda, the UK and the USA.

Main International Suppliers to Kenya

China, Japan, Saudi Arabia, South Africa, the UAE and the USA.

What is the benefit of sustained changes in exchange rates ?

Affects on international competiveness of a country

Impact on Economy with sharply falling Exchange Rate?

Positive impact, higher employment, income and tax revenues

The effect of constant Exchange Rates?

Difficult to predict demand for exports and costs for imports and make planning and budgeting more difficult

Why is Important International Trade to Toyota?

Toyota exports (sells) to many countries around the world, and it imports (buys) components, materials and resources from many different countries.

How might International Trade help a business like Toyota to grow?

Expanding to more countries enables them to increase their sales volumes, revenues and achieve growth as well as spreading risk, and reduce dependence on a single country.

What are two reasons nation trades ?

To sell goods and for importing more machinery,foodstuffs, chemicals, petroleum products and scientific instruments.

If €1 = ZAR 10, how much would a European customer have to pay in euros for an order worth ZAR 124 million?

€ 12.4 million

If the exchange rate rose to €1 = ZAR 18, how might Alumburg be affected?

They will be able to reduce their prices, increase sales and revenue.

How has South Africa benefited from international trade?

Since its economy became more open in 1994

One of the biggest benefits for South Africa?

Growing tourist industry

Toyota's global sales in 2017

8.97 million cars.

Toyota's revenue in 2017

1994372 million yen.

Toyota employees worldwide

Around 340000 people.

Toyota's founding year

1937.

What happens when exchange rates rise/fall?

It will sometimes benefit the business, but not always.

Primary Goods

Goods derived from extractive industries, such as agriculture, mining, and logging.

Define Exchange Rate.

It’s the value of one currency expressed in terms of another currency.

What does balance of trade measure?

It measures the difference between a country's total exports and its total imports.

Invisible Export

Export of services, e.g tourism.

Effect of Rising Exchange Rates on tourism

Discourages them as the price of holidays abroad will rise.

What do countries use Exchange Rate for?

Countries use Exchange Rate for international trades and transactions

When rates rise or fall, Who benefits?

Business benefits because prices goes down and demand goes up

What is more important for country, imports or exports?

Exports, as it more money into the country.

If the exchange rate falls

there is said to be a depreciation in the exchange rate.

If the exchange rate rises

there is said to be an appreciation in the exchange rate.