Here we are kicking off the summit session #8. Only one more to go! In this session, we will tackle the international trade theory and exchange rate systems. As you probably already know, international trade theory is defined as the exchange of goods between two parties that reside in different countries. The U.S. economy relies on and is dependent on foreign trade. Foreign trade allows consumers to purchase goods at lower prices and/or goods that arent produced in the U.S.

Here we are kicking off the summit session #8. Only one more to go! In this session, we will tackle the international trade theory and exchange rate systems. As you probably already know, international trade theory is defined as the exchange of goods between two parties that reside in different countries. The U.S. economy relies on and is dependent on foreign trade. Foreign trade allows consumers to purchase goods at lower prices and/or goods that arent produced in the U.S.

Now, you might be wondering whether the U.S. and consumers benefit from trade. The answer is yes. Let me tell you why. When consumers increase their demand for imported goods, the government increases the demand for those same imported goods which increases retail sales. Which, in turn, increases the countrys real gross domestic product (GDP).

Ok, thats a bit about international trade. Lets shift our focus to trade restrictions and their effectiveness. Foreign exchange rates and the difference between fixed and flexible exchange rate systems. First, let’s discuss trade restrictions and their effectiveness. Trade restrictions come in the form of tariffs and quotas. Tariffs are taxes imposed on imported goods and quotas limit the number of goods that the U.S. imports. Trade restrictions are in place to protect domestic producers and employment as well as infant industries. You might be wondering why, if the U.S. has trade restrictions, so many job opportunities are sent abroad to foreign workers? They do so for many reasons that might include government policies, regulations, and the well-being and safety of domestic residents in the U.S.

Now, lets talk a little about exchange rates and exchange rate systems. Exchange rates differ throughout the world. When a country’s currency is depreciated, it creates an increase in demand for imported goods from other countries. If a country’s currency is strong, this will lead to a decrease in demand for imported goods from foreign countries. A fixed exchange rate system is typically pegged against the U.S. dollar. A fixed exchange rate system can be manipulated by a country’s government. The advantage of a country that uses a fixed exchange rate is that a country will have certainty when they purchase goods at a global level. A flexible or floating exchange rate system cannot be influenced by the country’s government. At a global level, a country that uses a fixed (floating) exchange rate system must take the price based on supply and demand. At a global level, for a country that uses a fixed (floating) exchange rate system, there is no certainty with the country’s currency.

So, in this summit session, we have four objectives. We are going to accomplish those objectives in two ways. First, the quiz will contain questions relating to all four of them. Second, and most exciting, you will get to choose one of these objectives to explore in great detail and then create a presentation for your summit colleagues to view. In essence, you will be teaching each other about the summit topics. Pretty cool, huh?

By design, the activities in this session are lighter. That means you will have ample time to work on your research paper which is due at the end of the summit. I suggest you use that time wisely. Ive asked my associates at the Eagle Economics Institute to help me review them at the end of the final summit session which is rapidly approaching. Off you go, enjoy!
Module Objectives

Upon successful completion of this module, you will be able to:

Analyze International Trade Theory.
Examine trade restrictions and their effectiveness.
Discuss the foreign exchange market.
Distinguish between fixed and flexible exchange rate systems.

The objective that I want to expound on is trade restrictions and their effectiveness.

The presentation is required to be narrated and at maximum be five minutes in length. The required slides are:

Title Slide
Introductory Slide
Content Slide
Summary/Conclusion Slide
Reference Slide

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