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Industrial Trade

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Submitted By TIFFANYMARIE19
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International Trade
ECO201: Macroeconomics
Tiffany Rice
Argosy University

According to the USDC (2013), the trade balance between China and the United States for the most recent five year period is: i. 2015 - negative 365,694.5 million dollars ii. 2014 – negative 343,078.8 million dollars iii. 2013 – negative 318,713.2 million dollars iv. 2012 – negative 315, 102.5 million dollars v. 2011 – negative 295,249.7 million dollars (USDC, 2013).
According to Colander (2008), foreign trade between two countries can impact many things among each country such as income, prices, interest rates and trade policies. The U.S. and China appear to have used one of the two approaches in the exchange rate system regarding currency of their nations, known as the flexible exchange rate. The flexible exchange rate is a type of exchange rate that is determined by the market rather than the government and is freely allowed to go whichever way it likes to determine an equilibrium value, which is impacted by supply and demand of currency (Colander, 2008). The reason I believe that a flexible exchange rate was used between the U.S. and China is because of the various differentiating amounts of the trade balance between these two countries. The balance of payments is a summary that contains records of financial transactions. There are two types of transactions that are recorded in the balance of payments, which include the current account and the capital account. The current account is, obviously, the type of transactions that are recorded in the balance of payments between the U.S. and China, because the current account is, basically, specifically for transactions of foreign trade and the trade balance is the largest portion of the current account (Colander, 2008).
The issues, concerns and ramifications of the trade balance on

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