International trade & exchange rate

Question 1

What are the benefits of international trade

Answer 1

Creates opportunities for business growth and for countries to sell off surplus commodities
Increases competition
Consumer choice
Allows countries to obtain goods that cannot be produced domestically or goods that can be bought more cheaply from overseas

Question 2

What happens when the exchange rate falls

Answer 2

Demand for exports increase because they are cheaper and demand for imports decrease because they are dearer

Question 3

What happens when the exchange rate rises

Answer 3

Demand for exports decrease because they are dearer and demand for imports increase because they are cheaper

Question 4

What happens to the economy when the exchange rate falls sharply for a long period of time

Answer 4

Leads to higher export sales, creating more employment income and tax revenues for that country