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Measuring Trade

Measuring Trade. Chapter 17. United States Imports CIA Fact Book 2010. Industrial supplies 32.9% (crude oil 8.2%) Consumer goods 31.8% (automobiles, clothing, medicines, furniture, toys)

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Measuring Trade

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  1. Measuring Trade Chapter 17

  2. United States ImportsCIA Fact Book 2010 • Industrial supplies 32.9% (crude oil 8.2%) • Consumer goods 31.8% (automobiles, clothing, medicines, furniture, toys) • Capital goods 30.4% (computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery) • Agricultural products 4.9%

  3. United States Exports CIA Fact Book 2010 • Capital goods - 49.0% (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) • Industrial supplies - 26.8% (organic chemicals) • Consumer goods- 15.0% (automobiles, medicines) • Agricultural products- 9.2% (soybeans, fruit, corn)

  4. The Balance of Trade • Balance of trade– relationship between a nation’s imports and its exports • Trade surplus– a nation exports more than it imports • Trade deficit– when a nation imports more than it exports

  5. The United States Trade Deficit

  6. Results of the United States Trade Deficit • Extra dollars end up in the hands of foreigners • Foreigners use these dollars to purchase land, stocks and bonds • This is a form of export and balances our trade accounts • The value of the dollar against other currencies may fall

  7. Exchange Rates • Exchange rate– the value of a foreign nation’s currency in terms of another nation’s currency • Converts prices from one currency to another currency • For Example: 10 pesos equal 1 dollar

  8. Foreign Exchange Market • Foreign exchange market– consists of 2,000 banks and other financial institutions that facilitate the buying and selling of foreign currencies • Located: New York, London, Tokyo and many other major cities

  9. Strong and Weak Currencies • Appreciation– increase in the value of a currency. It takes less of a currency to buy another currency. This currency is getting “stronger” • Depreciation– decrease in the value of a currency. It takes more of a currency to buy another currency. This currency is “weakening”

  10. Effects on Net Exports StrongDollar Weak Dollar American exports rise Imports Increase As the dollar becomes stronger As the dollar becomes weaker… Imports Decrease American exports decline

  11. Exchange Rates and the Balance of Trade • A strong dollar will decrease US exports and increase our trade deficit • A strong dollar means our goods are more expensive to the rest of the world. • A strong dollar means other countries’ goods cost us less.

  12. Exchange Rates and the Balance of Trade • A weak dollar will increase US exports and reduce our trade deficit. • A weak dollar means our goods are cheaper to the rest of the world. • A weak dollar means other countries’ goods cost us more.

  13. Exchange Rate Table http://money.cnn.com/data/currencies/index.html

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