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international trade

Published on Jan 20, 2016

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PRESENTATION OUTLINE

1.

international trade

2.

half of all goods produced by private sector

exported and sold abroad
Photo by Monash University
3.

exports give

  • income for Canadians
  • tax revenue for the government
  • help pay for imports
4.

difference between buying and selling abroad?

use of different currency
Photo by epSos.de
5.

exporters want payment in their domestic dollar

can't pay for stuff with foreign dollar (raw materials, labour, etc.)
6.

i want to buy $10,000 worth of moz from chile

have to convert to peso (rate is 1 cad = 500 peso) so i get  5 000 000 chilean peso
Photo by filippo.salamone
7.

can be done at any bank, chile or canada

bank takes a commission, not a big deal to make trades
Photo by Curtis Gregory Perry
8.

export (receipt)

intl txn with a foreign currency - converted to canadian
Photo by hartlandmartin
9.

import (payment)

intl txn with a foreign currency - cad dollar converted into foreign
Photo by charlie cars
10.

so if i'm visiting sweden

i'm a swedish export... i have to convert to krona to do things
Photo by Claudio.Ar
11.

exchange rate

price at which one currency can be purchased for another
Photo by epSos.de
12.

how it's determined

value of curreny measured by price in terms of other currencies
13.

if one currency price goes up

we say that it has appreciated in value
Photo by Wicker Paradise
14.

cad goes from $0.81 to $0.82

appreciation oof cad in terms of usd of $0.01 happened
15.

depreciation same idea

Photo by hermanuslemmer
16.

flexible/floating exchange rates

determined solely by market force of supply/demand
Photo by jessica mullen
17.

remember - when we export things we want cad

demand for cad created in fx by importers of our goods
18.

demand for Cad increases as value drops

demand decreases as value rises
Photo by *** Fanch The System !!! ***
19.

if cad drops

increased demand for our exports - cheaper for others to buy
Photo by channone
20.

supply of cad

when cad value increases - we want to buy more (cheaper for us)
21.

equilibrium

quantity of euros demanded = quantity cad supplied - 1cad = 0.75 eur
Photo by Malinkrop
22.

what causes fluctuations in exchange rates?

we're not really sure... usually happens for a few reasons
23.

change in demand for canadian goods

increase in demand = higher cad
Photo by Rachel from Cupcakes Take the Cake
24.

demand

  • exports increase when economies of partners are growing (murica)
  • Canadian interest rates affect demand for CAD (higher demand with more interest)
25.

supply

  • increase in supply = CAD drops (opposite for decrease)
26.

fixed exchange rates

in terms of usd - caused problems...
27.

greedy jerks were making a lot of money

by anticipating the government's moves
28.

currency devaluation

government/central bank intervention
Photo by wbeem
29.

currency depreciation

losing value resulting from business/specuators
Photo by John-Morgan
30.

managed float

a bit of both flexible and fixed
Photo by Theron Trowbridge
31.

Government allows international market to set exchange rate, but intervenes sometimes to sort out short-term fluctuations.

Photo by Celad Evra
32.

dollarization

maybe we should all just be usd?

Peter Melkonian