International trade has grown over the last several years from $223 billion to $731 billion since 2001. International trade is done because many countries specialize in producing certain products in order to bring wealth to their country (Economics for Business, n.d).
The advantages of International trade within these countries were that they were able to specialized and produce products at a low cost and are able to export them to other countries for profits. The limitations that were against them was due to the different mixture of natural resources that were available to them (Economics for Business, n,d.)
The effects on international trade on the U.S. economy is that their needs to be a balance within each country when varies goods are being exchanged. Other countries must continue to accept U.S. currency for goods that are purchased as assets in order for the deficit to remain at the current exchange rate (Colander, 2008). International trade has seen an increase in trade restrictions of more than 30% tariff that has been imposed on goods (Colander, 2008). The key points that were addressed in the simulation are free trade, tariff, quota and cost to make profits.
The changes in fiscal and monetary policies affect exchange rate by interest rates, income, price level and inflations. The monetary effect on interest rates is that it can lower interest rates due to decreasing the value of the dollar. When the money supplies begins to fall, this will increase the income level and when prices levels begin to rise exports into the United States become cheaper. The fiscal effect is that when income is affected by the increase in income and imports. When this happens it will cause the increase of the trade deficit to lower the exchange rate. The price levels have an effect on the exchange rate when the aggregate demand increases therefore, causing an increase in the prices of exports (Colander, 2008).
The simulation that can be applied to the workplace would be...