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Foreign Trade and Exchange Rate

Foreign Trade and Exchange Rate

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Published by tanvir09

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Categories:Types, Business/Law
Published by: tanvir09 on Apr 14, 2009
Copyright:Attribution Non-commercial

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12/02/2010

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 Foreign Trade and Exchange Rate
Foreign Trade
Any exchange of goods and services with between two countries• ImportBuying goods and services from foreign country• ExportSelling goods and services to a foreign country• Balance of tradean account or a statement of country of its export to and import from all the other countryin a specific period of time
Benefits of Foreign Trade
• Makes goods and services which are not home grown to the home country• Makes things cheaper• Improves quality of life• Knowledge, technology and skill transfer• Conducive to specialization and efficiency• Labor mobilization• Social and political benefits
Balance of Payment (BOP)
“Statistical statement that systematically summarizes, for specific time period, theeconomic transaction of one country with the rest of the world.” (IMF)• Includes Balance of Trade and other components shown in the slides to follow
 
 Components of BOPCurrent account Capital account
Net export/Import of goodsandNet transfer due to purchaseservices of capital items and fixedNet income frominvestment andassetssalary and wagesNet transfer by migrantsandpermanent workers abroadand of gifts, grant, pensions
Financial Account Reserve and related items
Net foreign directinvestment Change of Net portfolio investment  Official money reserveOther financial items Gold reserve Foreign exchange reserve
Exchange Rate
Price of 1 unite of one country’s currency in term another country’s currency• Exchange rate of country A with country B is how much of currency B can be obtainedfor 1 unit of currency B• Today’s exchange rate of Bangladeshi taka with USD is 0.01454 while other way roundis 68.77 (source: yahoo finance)

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