INTERNATIONAL BUSINESS AND TRADE

Explain the following questions in a brief and concise manner.

1.)How exchange rate differ to foreign exchange. What does each term mean?

2.) Distinguish between a trade surplus and a trade deficit and suggest the implications for a country's economy.

3.) Describe the relationship between inflation, interest rates, and currency values?

B. Construct your understanding and reasoning abilities base on the following scenario.

1.Everest Company has been exporting its line of mountain climbing equipment to buyers worldwide for 30 years. Top markets include France, Norway, Switzerland, India, and Japan. Customers in these countries always pay in their local currency. Everest's vice president for international sales often states that the firm's biggest day-to-day challenge is dealing with foreign currencies. Why does he say this? What are the consequences of fluctuating exchange rates for Everest's sales revenue and other performance indicators?

2.) Nearly 20 European Union (EU) countries have adopted the euro as their national currency and are termed the eurozone. Sharing a single currency eliminates exchange fluctuations and simplifies trade. Eurozone firms had to make various operational changes, especially regarding finance and accounting, but generally prefer dealing in the euro. The ECB views the eurozone as one region and must apply the same monetary policy to all EU members, but this is problematic at times. The United Kingdom opted not to join the monetary union, keeping the British pound as its currency. What types of competitive advantages and disadvantages are associated with the implementation of the euro from the perspective of the firm? What types of changes did firms make once the euro became the new currency? Was adopting the euro worth it? Why or why not?