Question

What are some of the factors within the international trade environment that influences business ?

Answer 1

Factor affecting the International trade that influence the Business 1 Exchange rate transaction Currency of one country can be change with demand and supply as compare of another country. Currency can be depreciate and appreciate in there value. Example : A india company purchase software services to B in USA for $1 million INR moves form 75/$ to 70/$ INR is appreciated (In INR 75 million) Because we have to pay less in dollar INR pays 70 million to USA company. INR moves form 75/$ to 80/$ INR is depreciated Because we have to pay more in dollar INR pays 80 million to USA company 2 Change in Inflation If inflation is running rampant in a country, the price to produce a unit of a product may be higher than the price in a lower-inflation country. This would affect exports of the country and there trade balance.

3 Change in interest rate Interest rate of the country can affect the investment and appreciation and depreciation of the currency. Increase the interest rate may attract the foreign investors, which increase the foreign investment in the country. Foreign investment increase the value of currency and currency will be appreciate. Interest rate is high Attract the foreign invetor increase the foreign investements Increase the value of Rupees Appreciates Reduce Fedral reserve bank of US interese rate % Borrowing increase More money in hand Price of goods increased to control Inflation FRS increase the % Consumption increase 4 Impact of Government Policies = Country's government can have a major effect on its balance of trade due to its policies on subsidizing exporters, restrictions on imports, or lack of enforcement on piracy.

5 Impact of National income Total amount of income accruing to a country from economic activities in a years time is known as national income. Consumer puchasing power may be depend on the Income level of the country which affects the businesses of the county It includes payments made to all resources in the form of wages, interest, rent and profits