Today the current state of the United States macroeconomy will be discussed. Over the past three years the government has experienced economic growth and falling employment since the recession ended. However, this has been the weakest rebound from a recession after World War II ((Sivy, 2013). The unemployment is higher than it should be, and the economic growth has slowed down dramatically. Our citizens who have secure jobs and a stable home the outlook is promising, but we must not forgot those who are unemployed or who have lost their homes.
The economy is slowly improving and the United States stands to restore our economy. The government will need to do budget reforming ambitiously, before the growth becomes stagnant. This speech will explain what happens when there is a surplus of imports brought into the U. S; and will discuss international trade, foreign exchange rates, and how they affect the GDP, domestic markets, and students. The speech will also discuss how the government’s choices affect international relations and trades, what are foreign exchange rates, and how they are determined.
Questions will be answered such as, why doesn’t the U. S. simply restrict all goods coming in from China? Why can’t the U. S. just minimize the amount of imports coming in from all other countries? Since 1980 the U. S. unemployment rate had been declining whereas, the value of total imports steadily increased; a trend that remained in effect until the recession happened in 2008. The U. S. in a net exporter of services, and it exported $630. 4 billion in services while only importing $434. 6 billion. This caused a trade surplus in services of $195. billion. The services that exported were Intellectual property, as measured by royalties and license fees, and financial services, and the other was travel-related services (“Us Economy”).
When there is a surplus of imports the price drops, and it can be good for businesses as it increases the need for more employees. The United States trades with other countries that may have resources that we do not. Vice-versa, the other countries trade with us for our products and services that they may be rich in. However, in order for the U. S. o have a positive effect on our GDP (Gross Domestic Product), we must export more than import from other countries. Imports are not necessarily a negative impact on our GDP, but it appears that way because exports add to the GDP, and imports subtract. Imports do not exactly reduce domestic income, but it does not add to it either.
Based on our 1st quarter results the U. S. has continued to import more goods and services than we exported, and it is good for exporters and our consumers. We have to continue this progress to pay for our imports with our exports, and this will require discipline (Forbes. om). A tariff is a tax that adds to the cost of imported goods, and quotas are the time when a government limits the amount of a given good that can be imported. The government can choose to impose a tariff or a quota based upon what is best for our economy at the present time. There are several reasons the government may use a tariff, such as to protect domestic employment- that means a company may fire employees or send their production abroad. Another reason is to protect consumers, such as putting a tariff on products that may be harmful to the citizens.
Other reasons tariffs can be added are because of national security, and retaliation. Foreign exchange rates, tells us how much one of our dollars will exchange for one unit of another countries currency. Exchange rates can change continuous based many factors. Floating rates are determined by the market forces of supply and demand. How much demand there is in relation to supply of a currency will determine the currency’s value in relation to another country (investopedia). Some countries use a pegged exchange rate that is set and does not fluctuate; they do this to stabilize the value of their currency.
The country must have large reserves of currency to control the changes in supply and demand (investopedia). China provides the U. S with capital; therefore we should not restrict goods coming in from China because it would cause pressure on the U. S dollar and cause a dip in the economy. The U. S. owes money to China so it would not be beneficial to restrict them from importing to our country; however the U. S should plan to impose importation tax on China in the near future. If the United States should find a way to manufacture our own products we would not have to rely on other countries, which would minimize our imports.
Our country’s future depends on international trade and changing the comparative advantage. It is hoped that, the U. S. economy will become more independent and less dependent on other countries for their supplies and services. Our economy is not where it needs to be, but we are not where we were three years ago- (2010). The interest rates are lower than they have been in years, unemployment is lower than it was three years ago, and if we continue progressing on this upward path the recession may come to an end soon. The current state of the U. S. macroeconomy has an optimistic outlook for the future of our country.
http://www.investopedia.com/ask/answers/forex/how-forex-exchange-rates-set.asp Sivy, M. (2013, Jan).
What the Current Economic Outlook Means for American Families. Time Business & Money. Useconomy.about.com/od/tradepolicy/p/Trade_Deficit.htm