8/11/2019 Domestic Trade

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DOMESTIC TRADE composed of all business whose primary functionis to sell products in the Philippine marketFOREIGN TRADE refers to the exchange of goods and services bythe people of different countries.THE FLOW OF RESOURCES AMONG COUNTRIES:1. Flow of product !"d #r$%c#- flow of products can be carried out through exporting and importing- there is flow of services among countries by accepting job offers abroad&. Flow of 'o"#(- can be in the form of loans, grants or investments. It is usually the

exchange of currencies accepted in the international market.THEORIES WH) COUNTRIES TRADE:1. A*SOLUTE AD+ANTAGE- introduced by dam !mith.- a country is considered to possess absolute advantage over othercountries if it can produce more units of a particular product compared toother countries at the same amount of resources.&. COM,ARATI+E AD+ANTAGE- discussed by "avid #icardo in his book, Principles of Political $conomyand %axation &'(')*- theory which has become the basis for the study of internationaleconomy.-total production of a particular country will increase if it will speciali+e inproducing a particular product. If a particular country has the capacity to

produce a particular kind of product at a lower cost of productioncompared to other countries, it is more advantageous for other countriesto buy the said product from the country who produces it.

*ALANCE OF TRADE sometimes called as net export - refers to the difference between the value ofexports and imports

TRADE SUR,LUS- the balance of trade is favorableif #-port #-c##d %'port. It meansthat we are receiving more dollars and paying less for imports.TRADE DEFICIT- the balance of trade is unfavorable if %'port #-c##d #-port. Itmeans that we are paying more dollars than receiving them through ourexports.

*ALANCE OF ,A)MENTS measures inflows and outflows of for#%"#-c/!"#&the means used for debt payment by countries with differentcurrencies* of a country

- it is a list of all economictransactions of a country with other countries in terms of money at aparticular period. %he currency used is the ! dollars because this isconsidered as the international monetary unit.

*O, ACCOUNT record of all economic transactions of a country. Itlists all the foreign exchange a country earns as against the foreignexchange it spends.

COM,ONENTS OF *O,:

'. CURRENT ACCOUNT account which reflects the movement ofexports and imports of a country

- /0% 1 23I 1 Tr!"f#r of ,!('#"t&donations paid and received from official and unofficial sources*4. CA,ITAL ACCOUNT reflects all transactions involving investment inthe country

- record of a country5s investmenttransaction with the rest of the world during a given year6. CASH ACCOUNT through this, a country5s savings can be checked.

- consists of a country5s foreign reserves indifferent currencies and gold.

*O, SUR,LUS- /alance of payment is considered favorable if there are more foreign

exchange inflows than outflows*O, DEFICIT- /alance of payment is considered unfavorable if there are more foreignexchange outflows than inflows.

0!l!"c#d *O, !ccou"t is achieved when there is e7ual

amount of foreign exchange inflows and outflows in a givenyear. It is more ideal than a /0P surplus.

/0P is different from /0%. /0% is limited to trading while /0P

is wider in scope because it includes all financial transactionsof a country at any given time.

DOMESTIC TRADE composed of all business whose primary functionis to sell products in the Philippine marketFOREIGN TRADE refers to the exchange of goods and services bythe people of different countries.THE FLOW OF RESOURCES AMONG COUNTRIES:1. Flow of product !"d #r$%c#- flow of products can be carried out through exporting and importing- there is flow of services among countries by accepting job offers abroad&. Flow of 'o"#(- can be in the form of loans, grants or investments. It is usually the

exchange of currencies accepted in the international market.THEORIES WH) COUNTRIES TRADE:1. A*SOLUTE AD+ANTAGE- introduced by dam !mith.- a country is considered to possess absolute advantage over othercountries if it can produce more units of a particular product compared toother countries at the same amount of resources.&. COM,ARATI+E AD+ANTAGE- discussed by "avid #icardo in his book, Principles of Political $conomyand %axation &'(')*- theory which has become the basis for the study of internationaleconomy.-total production of a particular country will increase if it will speciali+e inproducing a particular product. If a particular country has the capacity to

produce a particular kind of product at a lower cost of productioncompared to other countries, it is more advantageous for other countriesto buy the said product from the country who produces it.

*ALANCE OF TRADE sometimes called as net export - refers to the difference between the value ofexports and imports

TRADE SUR,LUS- the balance of trade is favorableif #-port #-c##d %'port. It meansthat we are receiving more dollars and paying less for imports.TRADE DEFICIT- the balance of trade is unfavorable if %'port #-c##d #-port. Itmeans that we are paying more dollars than receiving them through ourexports.

*ALANCE OF ,A)MENTS measures inflows and outflows of for#%"#-c/!"#&the means used for debt payment by countries with differentcurrencies* of a country

- it is a list of all economictransactions of a country with other countries in terms of money at aparticular period. %he currency used is the ! dollars because this isconsidered as the international monetary unit.

*O, ACCOUNT record of all economic transactions of a country. Itlists all the foreign exchange a country earns as against the foreignexchange it spends.

COM,ONENTS OF *O,:

'. CURRENT ACCOUNT account which reflects the movement ofexports and imports of a country

- /0% 1 23I 1 Tr!"f#r of ,!('#"t&donations paid and received from official and unofficial sources*4. CA,ITAL ACCOUNT reflects all transactions involving investment inthe country

- record of a country5s investmenttransaction with the rest of the world during a given year6. CASH ACCOUNT through this, a country5s savings can be checked.

- consists of a country5s foreign reserves indifferent currencies and gold.

*O, SUR,LUS- /alance of payment is considered favorable if there are more foreign

exchange inflows than outflows*O, DEFICIT- /alance of payment is considered unfavorable if there are more foreignexchange outflows than inflows.

0!l!"c#d *O, !ccou"t is achieved when there is e7ual

amount of foreign exchange inflows and outflows in a givenyear. It is more ideal than a /0P surplus.

/0P is different from /0%. /0% is limited to trading while /0P

is wider in scope because it includes all financial transactionsof a country at any given time.