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International Trade and International Finance

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When a nation is mounting on capital resources abruptly and very rapidly, then the additional progress of such satisfied nation’ s state of affairs is accountable to be intermittent. In present international trade conditions, the phenomenon of laissez-faire may be noticed that leads to lack of the incentive to attract new investments (Lawlor, 2006).   On the basis of political and social environment, the general characteristic of a nation which determines its propensity to consume (in regards to the betterment of a progressive state) fundamentally depends on the adequacy of such incentives.   In context of contemporary global trades and culture, one can relate Keynes argument by highlighting the conditions for successful foreign investment (Sheehan, 2009).

In such case it may be established that either in domicile outlay or in foreign investment can make up aggregate investment.   It may also be noted that by the term ‘ investment’ , Keynes not only referred to monetary resources but it also includes access to precious metals, human capital, natural resources, and so on which have tangible economic value and benefits. A critical analysis of Keynes’ critique reveals that in conditions where the magnitude of aggregate investment is ascertained by the underlying principle of profit maximisation alone, the prospective for domestic investment will mainly be governed by factors like the domestic rate of interest in the in the long run as well as short run.

In contrast, the volume of overseas investment is essentially ascertained primarily with the size of balance of trade in favour of investing nation (Tily, 2007). Hence, in a culture where there is limited enquiry of direct foreign investment under the guidance of government or public authority, the economic substances with which it is rational for the government are to be thoughtful about the fluctuations in the balance of foreign trade in contemporary environment and prevailing domestic rate of interest (Magnusson, 2002). Let us consider in present system of international trades that the unit wage is fairly steady and it is not affected by the impulsive changes of considerable scale (such conditions are almost always satisfied in practice).

If the condition of liquidity preference is also rather constant (that is usually taken as the mean of its short periodic fluctuations), then the rate of interest will be

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preview essay on International Trade and International Finance
  • Pages: 14 (3500 words)
  • Document Type: Essay
  • Subject: Business
  • Level: Undergraduate
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