Reasons for international trade:
- To obtain goods that can not be produced domestically
- To obtain goods from foreign markets at cheap prices
- To provide choice to customers
- To sell off surplus goods
Invisible trade is the result of invisible imports deducted from invisible exports. "Invisible" refers to intangible services.
Balance of Payments is a document which shows the detailed transactions that one country has with the rest of the world.
Advantages of foreign trade to a business:
- Increased number of customers
- Enhances competition and increases efficiency
- Cheaper access to raw materials and labor in foreign markets
- Risk is minimized as the business relies on both home and foreign markets
Exchange rates
The exchange rate refers to the value of one country's currency in terms of another country's currency.
2015 $1 = Tk 50
2016 $1 = Tk 75
In 2015 $1 could buy 50 taka, but now $1 buys more(75 taka). Hence the dollar has appreciated.
Similarly, in 2015, it would take 50 taka to buy $1, but now it takes 75 taka to buy $1. Hence taka has depreciated.
Appreciation = Imports increase as foreign goods become cheaper
Exports decrease as exports become more expensive to foreigners
Depreciation = Imports decrease as foreign goods are more expensive
Exports increase as exports are cheaper to foreigners
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