International Trade and International Finance Essay

International Trade and International Finance - Essay Example From this essay ir is clear that  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.  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.  As the paper highlights  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 essent ially ascertained primarily with the size of balance of trade in favour of investing nation. 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.