Chapter 3: Global Economy David Palazzo Principles of Business and Personal Finance Block 3
The Balance of Trade
The difference between a countries total exports and total imports is that countries balance of trade.
The balance of Trade is important because this can tell the country if it has a trade surplus or a trade deficit. A trade surplus is when the country sells more than it imports. A trade deficit is when it imports more than it exports.
The exchange rate is the value of the currency in one country compared to the value in another country.
US exchange with Mexico is currently at 1 dollar equating to 14.57597 Mexican pesos.
The US exchange rate with Russia is currently at 1 US dollar equating to 34.88094 Roubles.
The US exchange rate with Japan is currently at 1 US dollar equating to 90.23698 Japanese Yen.
Factors Effecting Exchange Rate
Supply and Demand effects the value of currency.
The three main factors effecting currency values are: Balance of Payments, Economic Conditions, and Political Stability.
Importance of Geography
The importance of geography when doing business internationally is that if you have hot weather than you can not grow as many crops. If you have many rivers however, you can make it much easier to make trade routes. Many factors come into the equation when it comes to the countries economy. Everything about the climate and the terrain can effect how well a country can receive imports or give out exports.
Cultural influences can effect how well you do when doing business with another country. For example, in some countries a handshake can be considered an insult. If you walked into a board meeting in one of those countries and gave a handshake you could ruin the whole business deal or transaction.