Tag: International Trade

Terms used in International Trade

Terms used in International Trade Below are definitions of some terms and concepts used in international trade: Balance of trade– is the difference in value of a country’s exports and its imports. Current account– is the sum of the balance of trade (value of exports minus imports), cross border interest and dividends payments, and gifts…...

Comparative Advantage

Comparative Advantage The rationale for countries carrying out international trade is the concept of comparative advantage. A country has a comparative advantage in producing a good or service if the opportunity cost of producing that good or service is lower than producing any other good or service in that country, compared to other countries.  Both…...

Terms of Trade

Terms of Trade A country’s terms of trade represents the relationship between the price it pays for imported goods and the price it receives for its exported goods. If the prices received for exports exceeds what it pays for imports, a country’s terms of trade is said to be favourable as it means fewer exports…...

Exchange Rates

Exchange Rates Exchange rate is the price at which one currency can be exchanged for another. There are several factors that influence the level of an exchange rate, which include: – Inflation: the currency of a country with low inflation rates would appreciate, due to extra demand for their products because of cheaper prices and…...