Macro-3 Essay Example | Topics and Well Written Essays - 750 words

Macro-3 - Essay Example because aside from transportation costs, and other costs that are related to international trade which are included in the price of goods when they enter another market is not present when it is bought where it is produced. Second, the prices in the United States are affected by stiff competition, which is influenced by information about book prices on the internet, which causes book prices to drop. While I cannot assume that this is not happening in the Philippines, the fact that the United States is one of the countries that utilizes the internet heavily as for the information regarding prices, in order to regulate competition can be one of my solid bases. Thus, generally, I could expect that book prices in other countries such as the Philippines would be higher. This case proves to be inconsistent with the purchasing-power parity. While the theory assumes that the purchasing power parity can equalize the prices over the long-run, during the years because of market influences such as competition in one country which lowers down the price, or economic influences such as trade costs in another country which increases the price can cause divergence in prices. This purchase situation therefore, is inconsistent with the purchasing power parity if gauged for many years before prices generally equalize. 2. What is the importance of trade agreements and how is international trade related to the standard of living of the United States (as opposed to that of a small industrial nation or to a developing nation)? What significance do trade agreements have to your own company? Trade agreements are important in such a way that dealing with other countries regarding trade has significant economic impacts to a firm conducting the agreement. Different countries have different restrictions and economic policies as regards trade, which can impact the firm’s operations in that country. Trade agreements are made depending on the restriction of the country and the chosen mode of