Transcript 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)
Capital goods 30.4% (computers,
telecommunications equipment, motor
vehicle parts, office machines, electric
power machinery)
•Agricultural products 4.9%
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)
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
The United States Trade Deficit
0
-50
-100
-150
-200
-250
-300
-350
-400
1972
1976
1980
1984
1988
1992
1996
2000
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
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
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
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”
Effects on Net Exports
Strong Dollar
Weak Dollar
American
As the
dollar
becomes
stronger
exports
rise
Imports
Increase
American
exports
decline
As the
dollar
becomes
weaker…
Imports
Decrease
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.
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.
Exchange Rate Table
http://money.cnn.com/data/currencies/index.html
U.S
Australia
U.K
Canadia
n
Yen
Euro
Mexican
NP
Chinese
renminbi
U.S.
1
.6489
1.599
.6764
.01
1.051
0.11
0.12
Australia
n
1.541
1
2.465
1.042
0.01
1.62
0.17
0.19
U.K
0.6252
.4057
1
0.4229
0.01
0.657
0.07
0.08
Canadian
1.478
0.9593
2.365
1
0.01293
1.554
0.16
0.18
Yen
114.3
74.19
182.9
77.34
1
120.2
12.24
13.81
Euro
0.9516
0.6175
1.522
0.6436
0.01
1
0.1
0.11
Mexican
nuevo
peso
9.33
6.06
14.94
6.3
0.08
9.81
1
1.13
Chinese
renminbi
8.28
5.37
13.25
5.6
0.07
8.7
9.8
1