INTERNATIONAL TRADE

by • 31/07/2011 • 1st year EconomicsComments (1)1000

ADVANTAGES OF INTERNATIONAL TRADE

  1. A country can import the goods, which it cannot produce of its own.
  2. In emergencies such as famine, floods, required goods could be imported.
  3. It helps in development of culture and civilization among trading countries.
  4. Each country has its own interest, therefore peace and security promotes.
  5. Extension of demand in trading countries, results in large-scale production.

DISADVANTAGES OF INTERNATIONAL TRADE

  1. It results in international dependence, which is harmful in times of war.
  2. It may be harmful for development of domestic trade if natural resources are freely exported without any planning.
  3. Import of wine and intoxicants may destroy the health of the people.
  4. It may create jealousy among various countries for trade and results in war.
  5. It results in the specialization in few industries only, which may reduce the job opportunities.

BALANCE OF TRADE

The balance of trade refers to only to the merchandise or balance on visible transactions alone. In short, it is the difference between the values of exports and imports of physical goods of a country during a given period of time. If the values of (visible items) exports exceed the value of imports of visible items, it is said to the surplus or favorable balance of trade. The increased imports of machinery, equipments, raw material and oil prices have caused imports to grow faster. Causes of unfavorable balance of trade are included in the cause of adverse balance of payments because of payments refers to the sum of both the balance on visible as well as invisible items.

BALANCE OF PAYMENTS

Balance of payments expresses the total of all economic transaction between two nations for a period of one year. Each country’s balance of payments summarizes information about that country’s export, imports, earning, domestic residents on assets located abroad, earnings by central banks and government. In short balance of payment is a record of all transactions between households, firms and government of one country and the rest of the world. Any transaction that leads to a payment by a country’s residents or government is a deficit item identified by a negative sign, any transactions that lead to a receipt by a country’s residents or government is a surplus item and is identified by a plus sign.

DIFFERENCE BETWEEN BALANCE OF TRADE AND BALANCE OF PAYMENTS

Balance of trade is defined as the difference between value of exports and value of imports. If value of exports exceeds the value of imports, a trade surplus exists, if value of exports is less than value of imports, a trade deficit exists, if export and import values are equal, we refer to this situation as a trade balance.

Balance of payments takes into account value, of all international transactions. Thus balance of payments identifies not only goods and services transactions among nations but also investments and gifts. When value of all these transactions is such that one nation is sending more to other nations that it is receiving in return, a balance of payments deficit exists. When value of all these transactions is such that one nation is receiving more from other nations that it is giving in return, a balance of payments surplus exists.

THE SIGNIFICANCE OF ZAKAT

It is great pillar of Islam. It has great importance in out life. The importance of Zakat will be cleared from the following discussion.

  1. 1. Test Of Faithfulness:

It has a religious sanctity behind it. One who help the needy person from God’s given wealth; it is his test of faithfulness.

  1. 2. Obligatory On Ummahs Of All Prophets:

Zakat is a compulsory payment which was paid by the ummhas of all the Prohphet Salah and Zakat are two great pillars of Islam. Those whi discard these pillars are false in their claim of Muslims.

  1. 3. Sign Of Believers:

It never happened that any ummah believing in God was exempted from the obligation of Zakat.

  1. 4. Co-Operation:

Zakat is paid to the needy, poor and deserver. The revenue collected from Zakat is spent for the weklafre of the needy person.

  1. 5. Eradication Of Social Evils:

The poor commit crimes like theft; Dacoit etc, due to low economic position. These social evils are eliminated to help the needy person.

  1. 6. Circulation Of Wealth:

Zakat is an uncompromising enemy of hoarding. A Mulsim has to pay Zakat on the headed money due to the fear of God. In this way the amount f money remains in circulation in the market.

INFLATION

Inflation is a rise in the general price level and is reported in rates of change. Essentially what this means is that the value of your money is going down and it takes more money to buy things.

Causes Of Inflation:

 

  1. 1. Demand Pull Inflation:

When aggregate demand persistently exceeds the aggregate supply of goods at current prices, it leads to increase in general price level.

  1. 2. Cost Push Inflation:

When cost of production increases, price of goods and services also increases. Increase in cost of production may be due to increase in wages, taxes, interest rate, expensive imported and local raw material etc.

  1. 3. High Monetary Expansion:

The supply of money is expanding quickly every year but the supply of goods and services is not increasing according to that rates. Due to this process are rising.

  1. 4. Increase In Wages:

The rise in wages, pension and salaries have increased the purchasing power of the people. Wages and prices chase each other.

  1. 5. Increase In Population:

The rate of population growth in Pakistan is more than 3%. Due to this aggregate demand is increasing day by day.

  1. 6. Deficit Financing:

Means printing of currency notes by the Government, in order to covert the defect in the budged. It will create inflationary pressure.

  1. 7. Foreign Remittances:

The increased remittances by the people working outside the country, purchasing power of their families are increased day by day. So the demand is increased.

  1. 8. Natural Calamities:

Due to floods, excessive rains and earthquake the level of production is decreased increase in demand and hence, the prices of goods is increase.

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One Response to INTERNATIONAL TRADE

  1. Salman Qamar says:

    very information and easy to study. good luck for students

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