Question

develop a decision concerning on economy (minimum 900) word 1. exchange rate , 2 fluctuation , 3traffic barrier and 4production cost difference.

Answer 1

1) Exchange Rate - it regulates and determines a country's economic condition in the global market scenario.

i) It is evaluated and assessed for the growth and development of an economy, by the government bodies from time to time.

ii) It also plays a vital key role in the levels of trade (exports & imports) a country's economy possesses and runs.

iii) A country's imports side is much cheaper in comparison of its exports side (which are expensive and yield more profits to the economy) when its currency's value is higher internationally.

iv) An Exchange Rate is often used to compare the value of currencies between two economies which reflects their economic health in a more transparent form.

2) Fluctuation - The economic fluctuations are generally caused by various factors -

i) periods of expansion and contraction of an economy

ii) changes in demand cycle, as rise in income pushes to more demand and increased level of consumption, vice-versa

iii) change in supply cycle - lower interest rates, tax cuts and more government spendings lead to more investments. Thus, resulting in higher production and output generation which therefore increases the supply in and out (export) of an economy, vice-versa.

iv) Hence, fluctuations in an economy affects its level of national income and depicts whether a country is expanding while moving towards growth or is contracting with a lower level of national income.

3) Tariff barriers - it is a most common barrier in trade (export & impot) faced by an economy

i) taxes imposed on imports of goods and services from abroad, called tariff barriers

ii) it increases the price of the imported goods and services than the domestic one, and hence creates a tougher competition for the foreign companies.

iii) the domestic firms also enjoy the subsidies provided by the government. This makes the process of production more cost-effective and hence, makes their product's prices lower than the foriegn goods imported within an economy.

4) Production Cost Difference - Production cost refers to the cost incurred by a firm while carrying out its business process within an economy.

While the expenses made in the manufacturing process such as on - labour, raw-materials, infrastructure, tools and machinery, transportation, etc, are called the manufacturing costs.

Thus, the total cost of production comprises of : Production cost +  Manufacturing cost = Total Revenue

Hence, the production cost difference refers to the difference between : Total Revenue - Total cost of production

If the difference incurred is positive, then the fiirm is supposed to have profit and on the contrary if its negative, then the firm is under loss.