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Stephanie Brands
6/16/2013
Contents
International Trade 2
UK Balance of Payments 2
UK Trends in Trade over the last 30 years 2
The 80’s 3
The 90’s 3
Currently 3
Relationship between the Exchange Rate and Balance of Payments 3
The Advantages and Disadvantages and Effects of Two Exchange Rate Regimes 3
Floating Exchange Rates 3
Fixed Exchange Rate 4
Effects of Exchange Rates on Economic Agents 4
Impact of Multinationals on Less Developed Economies 4
References 5
International Trade
A free trade agreement is a group of countries which coordinate a removal of trade barriers between the agreed nations. The European Union is a trading bloc which operates free trade agreements between the 27 member countries. International Trade is the buying and selling of goods and services between countries. One country cannot produce all of the resources they require so trading can be done to gain other resources. The buying and selling of goods and services are recorded in the Balance of Payment Account. Purchases of goods and services from abroad that leads to an outflow of currency from the UK are known as imports. Sales of goods and service to other countries are an inflow of currency to the UK is known as exports.
UK Balance of Payments
Terms of Trade is the relationship between the …show more content…
It will reduce the costs of transaction and reduce the uncertainty in the exchange rate. There will be lower interest rates as the EU has committed to lower inflation rates. The cost of joining a single currency as loss of independent monetary policy and reduced independence of fiscal policy. There may be misalignment this means that one interest rate may not suit all. Benefits of a single currency are that there would be a reduced cost of transactions and lower interest rates. There will be an increase in foreign investment and market