International Trade Simulation and Report

Essay by xorcist316University, Bachelor'sA, June 2009

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In International Trade, a country prefers to capitalize on profits and take full advantage of the impact of opportunity costs associated with importing and exporting goods and services. The ideal situation for a country involved in international trade would be the exportation of specialized merchandise that can be efficiently produced and the importation of wares that are produced under similar circumstances. This creates reasonably priced goods that are desirable to other countries. (Suranovic, 2008, ch.30-0) This paper will discuss the advantages and restrictions of international trade and will identify four key points emphasized in the reading assignments and simulation.

Limitation and Advantage of International TradeInternational trade is "the exchange of capital, goods, and services across international borders or territories." (Wikipedia, n.d.) This is a simplified definition when considering the vast scale of exchange amongst the World's Economies. Exports, the goods and services sold abroad, and Imports, the goods and services bought from foreign sources, are part of a balancing act that must be monitored constantly to ensure that domestic and national economy stays healthy.

Mankiw (2007) states, "a trade balance is the value of a nation's exports minus the value of its imports". Keeping a balance between imports and exports is essential for a nation's growth. The key is to find the population desires for both sides. It makes no sense to produce, export and trade electronics when the country you wish to trade with develops and produces the same products. Research will show what other nations require and will put forth a plan that will allow both sides to acquire the goods and services needed.

Advantages to international trade are evident when the public desires a good that cannot be produced locally. A good example would be coffee. The climate needed to grow good coffee beans can...