Speech on the U.S. macroeconomy and international trade

¶ … individuals are knowledgeable about macroeconomics. It is a huge and potentially difficult subject to understand, and yet its constructs intimately affect each and every aspect of our lives. To show that this is so, I plan to explain some of the factors of the current state of the U.S. macro economy so that we can gain a better understanding of their implications. I will address this topic by posing four of the most popular questions and answering them by connecting them to our situation.

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.

When imports are greater than exports, the United States is said to have a balance of trade deficit. An example may be of the surplus of Sony electronics that are flooding the U.S. market from Japan. For any country to economically function well, the balance of the trade of that nation must be equitably balanced on both sides with trade surplus (i.e. A balance of national exports) equaling that of trade deficits (i.e. Surfeit of import). If import exceeds that of export, the country may find itself in grave economic danger since it can affect the output and income in the economy; the level of employment and unemployment in the economy; and the price level and the inflation rate in the economy. The output and income in the economy refers to the increased demand of national production that is stimulated by demand for exports (rather than imports). This leads to the country becoming wealthier. A surplus of imports, however, results, in decreased production. Unemployment rises since less people are involved in producing exports and since more citizens are accepting foreign-made rather than domestically-produced products. Finally, preference for foreign products as opposed to locally-produced products results in less of the local products being sold and in increase of their price. Whilst surplus of imports may be good for individual consumers who may end up paying the lower prices of these imparts and who have a section, it may be detrimental for the country in general (Froyen, 1998; Gordon, 1998)

Question 2: What are the effects of international trade to GDP, domestic markets and university students?

International trade is essentially the back and forth flows of business between one and more countries. If the country succeeds in boosting its exports, it stands a good chance of becoming wealthier, thereby increasing its GDP. America, therefore, under its Obama administration has recently placed a great deal of onus on innovation in order to overcome the setbacks of the recession where the national debt was highly increased, imports, during some years, outweighed exports, and its domestic market as a result suffered due to the fact that citizens were consuming more foreign goods than they were of their own. Less domestic goods were, therefore, produced, cost of these domestic goods rose, cost of supplies related to producing these domestic goods rose too, and part of the peripheral problems included more American business outsourcing or using foreign resources. All of this (and more) injured the domestic market.

An analogy may be drawn in terms of education. Firstly, with the national GDP raising the U.S. is enabled to pour more money into its educational coffers. From another point-of-view, export (or exodus) of students to other countries reduces the student body of people who choose to study in American universities thereby raising the cost of tuition. Tuition and fees paid by international students, on the other hand, have the effect of lowering fees. Consequently, the more international students the U.S. government can attract the better it is for its economic environment (International Trade Administration States.)

Question 3: How do government choices in regards to tariffs and quotas affect international relations and trade?

A tariff is a tax that adds to the cost of imported goods and is one of several trade policies that a country can enact. Quotas are the amount of a certain material / product that can enter the country at any one given time.

Tariffs are good for governments and producers in that it increases revenues. On the other hand, they are negative for consumers in that they raise the price of goods. During recessions or periods of economic difficulties, consumers may prefer domestic products or cheaper substitutes to that of foreign products. The price that the government puts on the tariff, thereby, effects how much of a particular good the consumers will acquire with acquisition depending on the particular economic period. This, in turn, will effect international relations and trade since importing companies may be dissuaded by higher tariff and disappointing response to import their goods (Investopedia. The Basics of Tariffs and Trade Barrier).

Question 4: What are foreign exchange rates? How are they determined?

Foreign exchange rates display how much one unit of a currency can be exchanged for another currency. Rates can be floating (i.e. They change continuously depending on various factors), or they are 'pegged', in which case they move in synthesis with the currency in which they are pegged.

The foreign exchange rate is determined by the rate of supply and demand. For instance, if Europeans currently desire the U.S. dollar, the value of the U.S. dollar in relation to that of the euro will increase. Many factors affect the conditions of one's preference for a certain currency. These include the amount of interest pegged to the currency, unemployment rates, inflation reports (i.e. level at which prices for goods and services are rising), GDP level, and manufacturing information (Investopedia. How are international exchange rates set?)

Question 5: 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?