International trading is an important aspect to our economy as well as other countries well being. This is important because trading allows countries the opportunity to receive goods and services that are not available in their own countries. For example, if one country specializes in agriculture than it will benefit from trading with a country that specializes in services. In this simulation, I was advising the President of Rodamia for recommendations for international trade.
One advantage of international trading that was encountered in the simulation was the variety of goods that could be gained for each country.Rodamia was gaining products that they wouldn’t be able to produce themselves. Rodamia’s economy also profited because by they were offering new goods to the consumers, having them spend more. One limitation of international trading that was encountered in the simulation was the quotas. Quotas put restrictions on how much can be imported.
By putting a limit on the amount that can be imported, this raises the price and only benefits one country. Absolute advantage is the ability of a country that can produce a good at a lower cost per unit than any other country producing that good. Rodamia produces corn at a lower cost per unit than Suntize.
When a country can produce a good at a lower cost than a competitor is comparative advantage. Foreign exchange rates are influences by many different factors. First and foremost the most influential factor would be the supply and demand of each country.
If a country’s national currency is different from the country that is producing the good than that country has to adjust. Another factor that influences foreign exchange rates is the state of a country’s economy. If a country’s economic state is not in good standing or is suffering than other countries are less likely to invest in their goods.