International Trade Simulation

International Trade Simulation

Introduction

The international trade simulation (ITS) is an illustration of how the international trade functions between countries. The simulation provides a brief overview of how to implement trade restrictions with tariffs. More importantly, the simulation provides fundamentals about how to negotiate trade agreements. The Rodamia simulation is a great way to see how international trades are coordinated. The Rodamia spokesperson workplace is where the most significant decisions of business are taken and policies of investment are created. The major disposition inside this simulation is Michael, the president of Rodamia. Michael demonstrated himself as a astonishingly enormous entrepreneur for being able to perform international trade discussions through different countries. The country Rodamia has a GDP contains from agriculture that is of 4%, poultry is of 30% and other services like tourism. The remaining 66% comes from miscellaneous services.

Discussion

Benefits of international trade are mainly the gain to the cost of principle. Efficiency on comparative advantage allows countries to be efficient at the inputs they put in so that their output is better than if done alone. The trade restrictions like tariffs, embargos, and quotas are generally beneficial to a country. However, such restrictions can have a negative impact because it can be used for retaliation if one country disagrees with another (Heakal, 2007).  

Now the question is, can the US economy is be better off? This depends on the cycle of business. Business cycles through different stages: expansion or monetary and fiscal changes, trade deficits or surpluses can vastly influence the economy. Moreover, the US economy is dependent upon the value of the dollar, which determines how imports and exports are proportioned. Overall, the US economy gains more through the use of international trade with fewer inputs and makes the economy more efficient. Through expansionary monetary and fiscal policies, the Federal Reserve and government are trying to put more funds into the hands of the country. When this occurs, it causes the exchange rate to go down. On the other hand, when contractionary monetary and fiscal policies are implemented, the Federal Reserve and the government are borrowing money more through bonds or increasing taxes and spending less. As a result, the exchange rate for the dollar will go up.

Comparative advantage and the standard of increasing marginal opportunity cost are two significant lessons that have applied to the simulation and to real life. One other lesson learned within the texts that was obvious in the simulation was the Production Possibility Curve. This curve presents all the various possibilities that could be made for the case of comparative advantage from a given number of inputs (University of Phoenix, 2007). The last illustration obtainable throughout the simulation as was in the text was the information that, taxes, tariffs, and quotas will occasionally reason countries to not desire to trade (Heakal, 2007). Many countries have free trade agreements in place. The European Union for example, has a large free trade network.

 

Advantages & Disadvantages

International trade has advantages as well as some ...