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Press Release How Economics Work

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Autor:   •  July 10, 2012  •  Essay  •  718 Words (3 Pages)  •  4,168 Views

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Ladies and Gentleman of the press, the forum is open for questions regarding the U.S. Economy and our international trade.

Q1.) 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!.) Whenever there is a surplus of products, regardless of origin, the price drops. Even to the point of selling at a loss, the holder has already paid the invoice and taxes, but still has to pay storage, the longer it holds the product the more money it costs, selling at a loss moves the product out of storage and clears the store front for another product that could be a more profitable seller. Take car sales as an example, do you really think that cutting $10,000 of the price of a $40K car makes sense if you can sell it for $40K? Of course not. However, if this vehicle sits on a lot for over a year, the value of it is being depreciated, and the more environmental wear there is, the less the eventual customer is going to pay. This affects the business since they pay a set price for the vehicle from the manufacturer or auction house, then they have to get a consumer to buy it. This takes man power, negotiations with banks for certain type of loans, etc.

Q2.) What are the effects of international trade to GDP, domestic markets and university students?

A2.) International trade adds another component to GDP like net exports. For an autarkic country, or one with no international trade, GDP consists of consumption, plus investment, plus government expenditure. But when a country is open to trade, its GDP is affected by its exports compared to imports. It is better to have more exports than imports. This in turn, obviously, effects domestic markets and university students, since these government controlled exports and imports also help our economy, including student federal loans, and what the U.S. needs to produce for them selves, and what they actually need from other countries.

Q3.) How do government choices in regards to tariffs and quotas affect international relations and trade?

A3.) When a government sets tariffs, other countries can lose out when it comes to trading certain products with other certain countries. After that they can be very difficult to deal with. For example, if the U.S. gave Australia higher tariffs on our exports, they may decide that trading with us is too expensive and will choose the lowest price for the same product elsewhere. If we lose the imports from them, or if they raise the prices on their products, we would do the same, and lose the friendly trade agreements we have in place right now.

Q4.) What are foreign exchange rates? How are they determined?

A4.) In finance, an exchange rate, also known as the foreign-exchange


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