Eco 372 Week 5

Currency exchange rates can be categorised as floating, in which case they constantly change based on a number of factors, or they can subsequently be fixed to another currency, where they still float, but they additionally move in conjunction with the currency to which they are pegged. Floating rates are a reflection of market movement, demonstrating the principles of both demand and supply, as well as limit imbalances in the international financial system. Fixed exchange rates are predominantly used by developing countries as they are preferred for their greater stability. They grant further control to central banks to set currency values, and are often used to evade market abuse. (MacEachern, A. 2008; Simmons, P.

Exports and imports are what encompass international trade balance. When there are more exports over imports a trade surplus happens and when there are more imports over exports a trade deficit happens. A country will acquire large quantities of foreign assets when it runs in a trade surplus so it can lend internationally to other countries. A country sells of its assets to other countries and becomes a big debtor nation when it runs on a trade deficit. A

1) The scope of any economy is that of creating a balance between its exports and imports, or exporting more than importing, in order to generate national gains and revenues. Within the United States however, it has often happened that the totality of the imports exceeded the totality of the exports. The result of

International trade is based on having a comparative advantage. Countries produce products that are easier for them to produce, then

It can generate a lot balance problems to nation economy if the imports are increased then a certain amount. The currency can be devalued too due to a lot of imports. The economic performance is dependent on the currency value. The annual GDP consists of consumer spending, government spending and capital investment. The overall major term is calculated using exports minus imports. If the number of exports increases than the imports then the export figure would be positive. The positive net exports plays major role in increasing the growth of economy. Increased number of imports means more manufacturing in the industries, which means more jobs and more number of people are employed. Imports on the other parts are considered negative on the economy. The exports also indicate the inflow of cash inside the country. Imports can drag the GDP down (Townsend, 1979).

Since the signing of the free trade agreement, trade has been dynamic and growing with respect to both exports and imports. In the long term, Israel is currently the United State’s 24th largest goods trading partner with $38 billion in total goods traded in the recent year 2014. When looking at exports alone in 2014, the total is $15 billion and the U.S. goods trade deficit with Israel was $8 billion in the same year. From the period of the signing, trade steadily grew. Between 1996 and 2010, bilateral trade in goods nearly tripled reaching $32.2 billion. The breakdown of trade results in 50% of bilateral economic exchanges are concentrated in trade in goods, 30% are investment, and 20% are in trade in services.

One of the most influential economic indicators in forecasting the health of economy is Foreign Trade. Each month and each year, the U.S Bureau of Economic Analysis provides a census of trades of goods and services and international transactions, and we can use those data to determine whether we have been recovering or not from the most recent recession, if we are at the peak of recovery, or declining. To do that, we will also look at international economies such as Germany, Japan, European Union, China, India and Brazil.

Foreign exchange rate determines the price exchange of two currencies. Changes in these rates affects the amount of goods and services import and export of a country. When a country currency is stronger, it is now exchanged for more goods than before, and once the currency is weaker, less of goods are purchased for the same amount of the currency. Financial institutions use the exchange rates changes to decide whether to buy/sell financial assets such as bonds, stocks, etc. That means, they will buy and sell foreign assets to gain profit. The value of these assets increases or decreases as the exchange rates change. If the dollar

The exchange rate is the price of a unit of foreign currency in terms of the domestic currency. In the Philippines, for instance, the exchange rate is conventionally expressed as the value of one US dollar in peso equivalent.

- This system, also known as Floating exchange rate system, retains the fluctuation of the currency’s value depending on the foreign exchange market. This market determines the exchange rate by the demand and

Economists today think that factor endowments matter, but that there are also other new yet important influences on trade patterns. The balance of payments includes the payments made for net exports as well as financial transfers. A trade deficit must be balanced with foreign investments, declines in reserves, or increased debt; likewise, a trade surplus will be balanced out with financial outflows or increased reserves. However, a country may not be able to take full advantage of its external economic opportunities unless its internal domestic economic organization is strengthened and improved. William Cline talks about the relationship between macroeconomics and trade policy, pointing out that the 1930s “provided a classic case of mutually reinforcing interaction between economic downturn and protection” (123). One alternative to US external adjustment would be the import surcharge in 1971, but it would let foreign countries immediately retaliate with their own special protection against US goods. Similarly, during the recession in 1980s, “loose fiscal and tight monetary mismatch and failure to recognize the importance of avoiding sharp dollar appreciation” were the central mistakes, which lead to huge trade deficit (126). In the absence of forceful correction of US fiscal deficits and some additional decline in the dollar, external deficits would widen even more. Therefore, proper fiscal, exchange rate, and international coordination policies are needed to help avoid

While the concept of exchange rates appears relatively simple, these rates fluctuate widely and often, thus creating high risks for exp0rters and importers.

In the world of Forex, swapping currencies is the name of the game. Foreign Exchange trading, also known as Forex or currency trading, refers to the world's largest financial market upon which one currency is traded with another for profits. The top ten most traded currencies in the Forex market include USD, Euro, Japanese Yen, British Pound, Canadian Dollar, Swiss Franc, Australian Dollar, Swedish Krona, Hong Kong, Dollar and Norwegian Krona. The prices of these currencies fluctuate on the basis of its supply and demand. Other factors such as interest rates and the country's financial and political state can also affect the worth of the currency. The participants of the Forex market are very diverse ranging from multinational corporations

“...increase in export sales will lead to an overall expansion in production and an accompanying fall in the employment rate.” (Steven, H & Michael, M, 2013, p. 233) Universal exchange can influence the level of investment development of an economy. Global exchange additionally considers the buy of capital products from outside nations and lays open an economy to mechanical developments attained around the globe. On the other hand, budgetary development can influence the sorts of merchandise a nation has the capacity to exchange. A mechanical development in a nation's import-contending part could, for example, lead to a general diminishment in the volume of exchange of a nation. Consequently, global exchange and budgetary development are

Barriers to trade in developing countries can hinder their economic growth by inducing disincentives to export. Tariffs on imports create a bias against exports by lowering the domestic relative price of exports, changing wages and rental rates that are absorbed by the export sector, and increasing the cost of imported intermediate inputs used by export sectors (Tockarick, 2006). Hence, import protection can function as