In macroeconomics, the economy is regarded as the whole unit. It involves the growth and stagnation of economy in general and when referring to a particular country as well. Microeconomics, on the other hand, handles economics on a smaller scale as compared to the abovementioned macroeconomics. For instance, microeconomics incorporates groups of people who constitute a small section of a city. Generally, both these concepts affect the economy results on a larger scale.
The International Monetary Fund (IMF) can be described as an international organization that comprises 184 member countries. Its main purpose is the promotion of exchange stability, international monetary corporation and orderly exchange arrangements to provide financial assistance to countries which need temporary guidance to regain balance of payment adjustments and foster a high level of employment and economic growth in general. The World Bank, on the other hand, is the name that is mostly used instead of the Bretton Woods that established the International Bank for Reconstruction and Development (IBRD). It comprises five main financial organizations that help to perform its roles. The IMF and World Bank policies and requirements, which have to be fulfilled in order to get their aid, help to facilitate the balanced growth and expansion of demand and supply of international trades by contributing to the maintenance and promotion of a high level of real income, rate of employment, and to the development of productive resources of all their members. For investors, an attempt to expand their businesses internationally while getting familiar with the current IMF and World Bank reports would be clear indicators of the countries’ stability, and as such, a favorable guideline before making investments.
All the services and goods taken to other countries refers to what is known as “export.” They increase the country’s GDP since they attract money in relation to the country. Import incorporates services and goods consumed by the domestic country but produced in other countries. Since the money spent on it leaves the country’s budget, it decreases the country’s GDP. The value of all the final services and goods produced in the country during the given time constitutes its GDP, whereas the price of each country's item or service is directly affected by the exchange rate incurred in the import and export transactions. When referring to demand and supply, the change in price in each country is affected by the demand for the other goods in a way that seems to reverse the initial trend that depends mainly on mechanisms found on floating exchange rates. If the demand and supply forces are not allowed to respond to the exchange rates, automatic adjustments cannot happen. International investors can study countries’ GDP to gage countries’ economic stability to identify whether it is wise or not to invest funds there.
A multinational corporation can be described as an enterprise that is managed from the home country but operates in several other countries. Through the economic globalization process, the multinational corporations play a vital role in the global economy. It is evident in the economic interdependence increase of national economies on a global scale through the rapid cross-border movement of services, capital flow, technological and goods exchange. In terms of the supply and demand, the multinational corporations play a role by providing a direct link between various countries’ economies and play a leading role in globalization. They use capital from developed countries to regulate the demand and supply of goods by creating a monopoly, then transferring the finished products to the wealthy nations where there is a ready market. They also create a steady and efficient supply and demand for their products. Concerning the investors, multinational corporation investment offers a better risk/reward ratio than investment in regional or national companies, making them a good contribution.
Foreign direct investment or FDI is an investment made by an entity or company based in one country mainly to a company based in another country. Capital flows can be described as the movement of money mainly for the business production, trade development or investment. They occur in corporations mainly in the form of capital spending and investment capital in the research, development and operations management. When referring to supply and demand, foreign direct investment and capital flows are important aspects since they both tend to affiliate or flow into countries that have stable currencies, are dynamic, and have strong governments. To attract foreign investors and capital, a country needs a stable currency. The prospect of exchange can be influenced due to the inflations that may discourage foreign investors. Therefore, the prospect of demand and supply in relation to its other services and goods is affected. At the same time, both FDI and capital flows will be advantageous to an investor since they will help him/her establish a business anywhere globally due to the free flow of money, which remains to be the best prospect for business growth. Moreover, it helps to minimize the risks and provide room for diversification.
Foreign Exchange Market can be described as the market that can allow participants to easily speculate exchange, sell or buy currencies. The market comprises commercial companies, banks, investment management firms, retail forex brokers, hedge funds and investors. Globally, it is considered to be the largest forex market. Exchange rates can be defined as the price a nation places on its currency in comparison to another country’s one. There are two components that constitute an exchange rate such as foreign and national currencies that can be either directly or indirectly quoted. In the economy, just like any other price, the rates of exchange are determined by the demand and supply on the international financial markets. If a particular currency is being sold by many investors, then they are making its supply increase and available everywhere. If the currency does not receive an equal demand or buyers, its price falls to strike the balance between its demand and supply. The direction of the currency value will determine countries flow of money into its forex trades and assets. It will help to reduce international trade risks and introduce disciple in the management of economic investments. Moreover, it will help business owners to reduce speculations before investing.
In the science of political economy, the labor theory of value can be described as a concept that can be used to explain how the working class is exploited under capitalism and how the society functions. In terms of its relation to supply and demand, it can be explained that if the amount that the purchaser values the time it would take to produce the good is greater than its purchasing cost, then he/she will opt to make it rather than buy it. The price fluctuation above and below is how the value mechanism works and supply and demand is maintained by the fluctuations. For example, if a price is low, then the labor value from that sector is withdrawn; if it is high, it attracts investments and repartitions, as well as labor to new sectors. Thus, the supply and demand is demonstrated in such a way. For an investor applying the labor theory of value, it will help him/her understanding how the economics of capitalism functions. That is the matter that maintains a commodity fixed within the targeted market. With this knowledge in mind, they can easily determine which goods or services they can implement for the international expansion of their ventures.
The marginal rate of transformation can be described as the sacrificing rates of one good being able to produce another single extra unit while assuming that both of the goods inputs need resources that are scarce. In terms of demand and supply, as with the increase of the marginal rate of transformation costs, the PPF decreases. When referring to the production of more than one good, the opportunity cost in units of the other good increases. Therefore, the supply and demand of both goods is maintained. An investor wanting to expand internationally will benefit from the fact that he/she can use a principle to know which products are more necessary than others in terms of the business they want to establish. Thus, they will make better and deliberate decisions.
In economics, gains from trade refer to the agents’ net benefits that allow voluntary trading increase between each other. Comparative advantage, on the other hand, is described as an ability of an individual or firm to produce services or goods at a reduced opportunity cost in comparison to other individuals or firms. In terms of demand and supply gains and comparative advantage, if these combined concepts in a trading scenario are implemented, they can lead to a situation where both trading partners are better off. Therefore, an efficient supply and demand flow is established mainly in a Pareto improvement as compared to the normal utility gain over other allocations. The concepts comparative advantage and gains from trade to an investor will help them gain the upper hand as they look for opportunities to make international investments mainly to identify things that the locals are not good at being able to control the supply and demand of the services or products.
Economies of scale can be defined as the rising cost advantages that increase with regard to the products output. Due to the inverse relationship between the per-unit fixed costs and produced qualities, the economies of scale occur; the lower the fixed costs per unit are, the greater the quality of produced goods. The matter is that over a large number of goods, the costs will be shared. When referring to the supply and demand, it can be explained that as a company increases its production units and growth, its costs will also likely to decrease. Therefore, with the increased scope of industrial operations, the costs will be lower and this will not only attract consumers and investors, it will affect its supply and demand. If an investor understands this concept, it would be beneficial for him/her since when making a strategic decision to expand business internationally, he/she will be in a strategic position to balance the DS and ES effects of different sources. In such a way, their average costs all round for the decisions made will be lower.
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