Macroeconomic factors

affecting trade
 ● The interest rate is the amount a lender
charges for the use of assets expressed
as a percentage of the principal.

● Interest rates apply to most lending or

Interest rates borrowing transactions.

● 2 Types of Interest rate:

a. Real Interest rate

b. Nominal Interest rate

 a. Real interest rate

- the percentage increase in

Types purchasing power that the borrower
pays.
of
interest rate b. Nominal interest rate

- the percentage increase in

money that the borrower pays.
 ● The interest rate charged by banks is
determined by a number of factors, such
as the state of the economy.

How does Interest rates ● When the economy sets interest rates at
a high level, the cost of debt rises.
affect trading?
● The demand for goods and services will
then drop, which will cause inflation to
fall.
 ● Interest rates affect trades because
higher interest rates offer lenders in
an economy a higher return relative
How does Interest rates to other countries. It also attracts
affect trading? foreign capital and causes the
exchange rate to rise. While lower
interest rates tend to decrease
exchange rates.
 ● It is the value of one nation’s
currency versus the currency of
another nation.

Exchange rates ● Types of Exchange rate:

a. Nominal Exchange rate

b. Real Exchange rate

 ● Nominal Exchange rate

- it is the rate at which a person

can trade the currency of one
country for the currency of the
other.
Types of exchange rate ● Real Exchange rate

- it is the rate at which a person

can trade the goods and services
of one country for the goods and
services of another.
 ● The exchange rate affects the trade
surplus or deficit which affects the
exchange rate. Weaker domestic
How does exchange rate currency stimulates exports and
affect trading? makes imports more expensive.
While a strong domestic currency
slows down and makes imports
cheaper.
 ● It is the rising general level of prices
and it reduces the “purchasing power”
of money.

● 3 Causes of Inflation
inflation a. The government prints too much
money

b. Demand-Pull Inflation

c. Cost-Push Inflation
 a. The government prints too much money
- governments that keep printing
money to pay debts end up with
hyperinflation.
Causes
of b. Demand-Pull Inflation
inflation - demand pulls up prices

c. Cost-Push Inflation
- higher production costs increase
prices
 ● Rising inflation makes local goods
more expensive and less attractive to
consumers, while imports turn cheaper.
How does inflation
affect trading? ● Higher prices can reduce exports
because of the competition in
international trade.
 ● It is a statistical indicator of changes in
the market value of a certain group of
shares or stocks.

● Sometimes it is referred to as “stock

Equity indices index”

● Indexes are also created to measure

other financial or economic data such as
interest rates, inflation, or
manufacturing output.
 ● Stock market is usually aligned with a
growing economy and leads to greater
investor confidence. Investor
How does equity confidence in stocks leads to more

indices affect trading? buying activity which can also help to

push prices higher. When stocks rise,
people invested in the equity markets
gain wealth
 ● Also known as “yield spreads”

Bond spreads ● It is the difference between two

yields usually expressed in basis
points.
 ● Bond spreads represent the
How does bond spreads difference of bond yields between
affect trading? two countries, which give rise to
exercise trade.
 ● It is the value of all final goods and
services produced in a country’s
Borders in one year.
GDP ● Not included in GDP:
(gross domestic
a. Intermediate goods
product)
b. Non-production Transactions

c. Non-market and illegal activities

 a. Intermediate Goods
- these are goods inside the final
product.

b. Non-production Transactions
- monetary transactions that are not
Not Included: counted in GDP because nothing is
produced.

c. Non-market and illegal activities

- these are things made at home.
(Homemade products)
 ● GDP increases when there is a
trade surplus: that is, the total value of
goods and services that domestic
producers sell abroad exceeds the total
how does gdp affect value of foreign goods and services that

trading domestic consumers buy. If domestic

consumers spend more on foreign
products than domestic producers sell to
foreign consumers—a trade deficit—
then GDP decreases.
 ● These are the individuals who are
employable and actively seeking a job
but are unable to find a job.

● 3 Types of Unemployment

unemployment a. Frictional Unemployment

b. Structural Unemployment

c. Cyclical Unemployment
 a. Frictional Unemployment
- temporary unemployment or being
between jobs.

b. Structural Unemployment
Types of unemployment some
- changes in the labor force make
skills obsolete.

c. Cyclical Unemployment
- unemployment caused from a
recession.
 ● If the unemployment rate is higher, the
general income (and therefore, cash to
spend) will be limited. With less cash,
How does people spend less money, and there’s
unemployment affect less of a demand for products. It means
that stock prices can go down in many
trading? areas because there isn’t much of a
demand for certain goods.
 ● Trade deficits are the excess of
imports over exports

Deficits ● A deficit occurs when expenses

exceed revenues, imports exceed
exports, or liabilities exceed assets.
 ● A deficit creates downward pressure on
a company's currency under a floating
exchange rate rule.
How does deficits
affect trading? ● Cheaper domestic currency results in
imports becoming more expensive in
the country with the trade deficit.
 ● The quantity of goods and service
produced from each unit of labor input.

● It is the ability to produce more output

Productivity ● Determinants of Productivity:

○ Land
○ Workers
○ Capital (Human Capital)
○ Technological knowledge
 ● Land
- includes natural resources

● Workers
- Labor

Determinants of ● Capital (Human Capital)

Productivity - includes machines and

infrastructures

● Technological knowledge
- the sum of total knowledge and
information that society has acquired
concerning the use of resources to
produce goods and services.
 ● Imports expose domestic firms to greater
competitive pressure, while giving them
access to more and better inputs.

How does productivity ● Exporters increase productivity by learning

from overseas customers and through
affect trading? exposure to competition from foreign
producers.

● Alongside productivity gains within firms,

trade fosters reallocation of resources
between firms, toward the most productive
Thank you!!!
 Wendy herrera
Khianne mae Obias
Owen Orillosa
Van oliver uy