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international trade and exchange - Coggle Diagram
international trade and exchange
international trade
international trade benefits the world. It makes opportunities for business to increase customer choice, business growth and increase competition
what does international trade allow
goods that are cheap to purchase overseas
help improve customer choice
availability of goods and services that are not available in the home market
help sell off additional amount of supply produced to other countries
visible and invisible trade
visible trade
a good, are those goods which are visible to our eyes. They are recorded when crossing the border. For example machinery, rice, wheat, cloth or species
invisible trade
a service, something you can't see
difference between visible exports and visible imports is known as Balance of Trade (BoT)
exp: Spain has a BoT of 6,852.5 million euros, this means that the country has exported (sold) more goods than goods it has imported (buyed from another country)
exchange rate
the price of one currency expressed in terms of another currency
Money is a commodity, a currency's value depends on
demand-
the number of people who want to buy it
supply
the number of people who wanr to sell it
exchange rates can have big effects on businesses
the effect upon a business depends on whether the business buys and sells aboard
affecton imports hen the value of the currency decreases
become more expensive so will fall
affect on exports when the value of the currency increases
becomes more expensice so will fall
affects in import when there is an increase on the currency
beacomes cheaper so wil increase
affect on exports when the value of the currency decreases
becomes cheaper so will increase
working out exchange of currencies
buy
UK import businesses have to change pounds into foreign currencies to buy from suppliers
sell
UK export businesses want paying in pounds.
:
Foreign customers will therefore have to change their currency into pounds to make the payment.
to work out the exchange of currencies you will need to
To change a foreign currency back into pound, divide the sum by the rate. E.g. to change €90 into pounds, divide 90 by 1.48 = £60.81
To change pounds into another currency, multiply by the rate. E.g. at £1 = €1.48, £50 changed into Euro would be 50 x 1.48 = €74
summary
For
exporters
, rising exchange rates may lead to a fall in the demand for their products and make it much harder for them to be able to compete in foreign markets.
Exporters prefer a weaker £ because it makes their products appear cheaper to foreign customers
For
importers
, the problem is when exchange rates fall.They can either up the price they have to charge customers or lower their profit margins.
Importers prefer a stronger £ because it lowers the price they have to pay suppliers