Well, I really wanna know that how do imports and exports effect nations’s economy and its currency. I’ve been reading some articles regarding third world economy and have educated myself about how a country cuts down its imports and increases its exports to cope up with economic challenges, but how does it work? Thanks in advance.
In: Economics
Countries tend to export the stuff they can produce relatively cheaply and import the stuff that they can get cheaper from other countries. To the best of my knowledge, economists do not usually think it is important for a country to export more than it imports.
If you export stuff, foreign buyers need to buy some of your currency (i.e. swap some of their currency for yours) to pay your country’s sellers. This increases the value of your currency, as well as your reserves of foreign currency. It is good for your country’s sellers, because they can sell a larger quantity than before, and at a higher price. However, it is bad for your country’s buyers, because they must pay a higher price to compete with the foreign buyers.
Similar things happen in reverse if you import stuff. Your country’s buyers/importers need to buy some of the other country’s currency. Consumers/buyers in your country are better off than before, because they can buy stuff that was produced at a lower price in a foreign country. (Think of toys or shoes that became cheaper as we increasingly started to import them from China or southeast Asia). However, importing is bad for manufacturers in your own country, because they are competing with foreign manufacturers.
In most cases, economists would argue that the good effects of exporting are larger than the bad effects. Remarkably, the same is true for importing!
In addition to asking here, the folks over at r/AskEconomics might be able to offer you some more help on the subject.
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