International Trade and Finance Speech Essay

The purpose of this paper is to organize a speech that will be provided to a number of reporters that are not knowledgeable with economics. In this paper I will put importance on international trade and foreign exchange rates and how those affect the GDP, domestic markets, and students. I will also outline some of the benefits on goods and services that are imported from other countries and how those contribute to our economy in the United States. What happens when there is a surplus of imports brought into the US? When there is a surplus of a product imported into the US, it drives the prices of that particular product down. The reason it drives the prices down is because the owner of the product gets to a point where they need to clear out inventory so they sell it at a price lower than originally expected. These companies will go as far as taking a loss on the product just to clear the inventory. This surplus is a plus for the consumer. (Armadeo, 2013) Car dealerships are a prime example of companies that clean out old inventory at a reduced price. They run end of year specials that are hard to beat. One dealership had a Chevrolet Malibu for $22,110. The end of year pricing deal they offered was $3000 cash back or 0% interest on a 60 month loan. When deciding which offer is the best, a person must first look at what the percentage of interest is that they would be paying on top of the loan amount. (Mello, 2012) What are the effects of international trade to GDP, domestic markets and university students? The international trade effect on the GDP depends on if it is a surplus or deficit. If the imports are lower than exports this will have a positive effect on the GDP, domestic markets, and university students. A positive effect in the GDP increases the job market. This in turn increases money into the economy and increases sales in the local markets. This also helps the university student find a job to help finance their education. This also allows them to buy supplies for school cheaper, for example, the price of computers become lower when there is a positive effect on all these things. International trade increases options for the consumer to choose from, therefore the price on these items are more competitive. Negative effects will do the complete opposite. (McTeer, 2008) How do government choices in regards to tariffs and quotas affect international relations and trade? Simply put, tariffs are taxes the government imposes on imports. Quotas are numerical limits set by the same government imposed on the same imports. If the country imposing the tariffs and quotas set the tariff too high then this could cause future issues between the two countries. If a country wants to have a good relationship with a country they will impose lower tariffs. (â€Å"The Basics of Tariffs and Trade Barriers†, 2011) What are foreign exchange rates? How are they determined? A foreign exchange rate is the cost of converting different currencies. For example, if the foreign exchange rate for the euro is 100=$1 then 100 euros equals $1. If it costs 125 euros to exchange for $1, then the euro is not as profitable as the dollar. Exchange rates are generated by the volume of currencies acquired and sold. â€Å"Though they are affected in both the short term and long term by innumerable factors, currency supply and demand will always, ultimately, determine currency prices in the foreign exchange markets† (Sisson, 2012). Why doesn’t the U.S. simply restrict all goods coming in from China? Why can’t the U.S. just minimize the amount of imports coming in from all other countries? If the United States were to restrict all goods coming in from China it would negatively affect our relationship with them. The United States is majorly in debt to China. Upsetting them could cause them to call in all our loans. It will also affect the profitability of China’s investments and their supply in which American companies are operating. The United States cannot decrease the amount of goods coming in from other countries because it would have a huge impact on employment and the cost of items in this country. A variety of items cause them to have more competitive pricing. When you do not have people working, there is less money to be spent back into the economy. All of these reasons greatly impact the United States economy. The United States needs to trade with countries with more promising tariffs and quotas, and try to keep things fair between imports and exports to help promote a better GDP. References Mello, T. B. (2012). Sweet year-end deals available on some popular cars. Retrieved from http://www.nbcnews.com/business/sweet-year-end-deals-available-some-popular-cars-1C6750390 Armadeo, K. (2013). The US Trade Deficit. Retrieved from http://useconomy.about.com/od/tradepolicy/p/Trade_Deficit.htm McTeer, B. (2008). The Impact of Foreign Trade on the Economy. Retrieved from http://economix.blogs.nytimes.com/2008/12/10/the-impact-of-foreign-trade-on-the-economy/ The Basics of Tariffs and Trade Barriers. (2011). Retrieved from http://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp#axzz2KI2v2hAC Sisson, N. (2012). ehowmoney. Retrieved from http://www.ehow.com/about_6593199_exchange-determined-markets-foreign-exchange_.html Colander, D. C. (2010). Macroeconomics. : McGraw-Hill.