International Trade and Finance

International Trade and Finance

• What happens when there is a surplus of imports brought into the U.S.? Cite a specific example of a product with an import surplus, and the impact that has on the U.S. businesses and consumers involved.

A surplus and deficit within the trading community must maintain a balance. When an import surplus exists it creates a trade deficit because the country is consuming more than it produces and exports. An example of this is shown in the oil industry. The U.S. relies on foreign countries for oil, gas and other petroleum related products. This creates a supply and demand effect and allows for price gauging on the part of the exporting countries.

• What are the effects of international trade to GDP, domestic markets and university students?

The U.S. is a major contributor to international trade as we rely heavily on products imported from other countries and tend to import more than we export. This lowers the GDP and impacts the domestic markets overall because we are making purchases outside the country. This affects students because jobs are not being created and maintained in the U.S.

• How do government choices in regards to tariffs and quotas affect international relations and trade?

Tariffs and quotas are put in place to urge the government to impose limits on imports and exports and the tax to be collected on these goods and services. Exchange rates are put in place to encourage foreign investors to participate in international trade. The policies are put in place to stabilize the U.S. economy and maintain its profitability.

• What are foreign exchange rates? How are they determined?

A foreign exchange rate is the exchange rate between two currencies at which one currency

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