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International Economics

1.a) Why do some regions promote unrestricted trade within their region but restrict trade that crosses the region's boundaries?

b) Why would they not extend the advantages of intraregional trade by extending the same privileges to countries outside their region?

2.a) Many countries today have exchange rates that float somewhat freely against other countries. How can a business manager, who is responsible for foreign transactions, forecast exchange rates to better manage foreign exchange exposure?

b) Evaluate your contentions in part 'a' of this DQ by:

Reviewing the trends in the exchange rates of the U.S. and one other country over last five to ten years. For example, you might review the United States dollar/Canadian dollar (US$/C$) exchange rate. See the St. Louis Federal Reserve Bank FRED 2 web page for statistics on exchange rates at http://research.stlouisfed.org/fred2/ => Exchange Rates.

Reviewing the information on exchange rates at University Library => Library Resources => Country Profiles and Economic Data => EIU Country Intelligence => Select the United States of America link. In the scroll box called 'Step 1: choose broad category 'select' 'Exchange Rates' and, in scroll box called 'Step 2': select specific topic 'review the Exchange Rate Forecast and the Exchange Rate Forecast Summary'.

After you have reviewed the above information, discuss the trends you expect in the exchange rate of the US$ and the currency of the other country you chose for this DQ.

3. Analyze how the foreign exchange market works and how exchange-rate risk is managed.

Solution Preview

1. a) Why do some regions promote unrestricted trade within their region but restrict trade that crosses the region's boundaries?

Some regions promote unrestricted trade within their region but restrict trade that crosses the region's boundaries. This is because of economic policy within that particular country. Each region handles trade in their part of the world differently, and this requires much patience on the foreigner. He or she will have to find out what the laws are before partaking in this opportunity to do business. Not only that, but there is a trade agreement that takes place internationally that all countries have to abide to, and if for some reason a country does not comply that they are facing fines from those in charge. This allows for peace and to prevent any dissension from occurring. Also, some parts of the world do restrict trade due to having issues with other parts of the world or because they have no need for a specific product that is offered to them from a particular business.

b) Why would they not extend the advantages of intraregional trade by extending the same privileges to countries outside their region?

They are likely to not extend the advantages of intraregional trade by extending the same privileges to countries outside their region. This is because they can spend so much internally than they can abroad. For anyone to do business with another country is more expensive than within one's own. Some are more developed than others to make this happen, although this is not ...

Solution Summary

This solution answered questions pertaining to economics.

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