Bell Work Why don’t you just make everything you want and need yourself instead of buying it all from someone else?

In Lak’ech by Luis Valdez Tu eres me otro yo Si te hago daño a ti, Me hago daño a mi mismo Si te amo y respeto Me amo y respeto yo You are my other me If I do harm to you, I do harm to myself If I love and respect you I love and respect myself

Bell Work Why don’t you just make everything you want and need yourself instead of buying it all from someone else?

2008 Financial Crisis https://www.youtube.com/watch?v=GPOv72 Awo68

Chapter 17: Resources for Global Trade How does trade benefit all participating parties?

I, Pencil – the Movie

Why Nations Trade Specialization allows countries to produce things they do best and trade them for things other countries do best. Countries export the goods and services they do best and import the goods and services they want, but cannot produce as efficiently. International trade is beneficial to all countries, regardless of their size.

The Basis for Trade A country has an absolute advantage when it can produce more of a product than another country. A country has a comparative advantage when it can produce a product relatively more efficiently or at a lower opportunity cost than another country.

The Gains from Trade When two countries trade products with a comparative advantage to both countries, the trade benefits both countries and results in economic growth. One of the most important non-production benefits of trade is increased political stability between nations that have strong trade relations. International trade results in a bigger market for a country’s manufactured goods and services, which allows greater specialization at home, which in turn increases economic growth.

Specialization and Trade https://www.youtube.com/watch?v=NI9TLDI PVcs

Why is specialization a good idea in trade. A Why is specialization a good idea in trade? A.It increases the maximum combinations of products an economy can import when all productive resources are fully employed. B.It allows nations to import the products they produce best and export the products that other nations produce best. C.It allows nations to export the products they produce best and import the products that other nations produce best. D.It increases the opportunity cost of exports and lowers the opportunity cost of imports.

What does it mean when we say that a country has a comparative advantage in producing a product? A.It means that the country can produce the product at an opportunity cost that is lower than any other country's opportunity cost. B.It means that the country has a higher opportunity cost of producing the product than any other country has. C.It means that any other country has a lower opportunity cost of producing the product. D.It means that the country's absolute cost of producing the product is higher than its opportunity cost.

What does a production possibilities curve show. A What does a production possibilities curve show? A.It shows the maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed. B.It shows the minimum number of goods and/or services a country can import when all productive resources are fully employed. C.It shows the maximum combinations of goods and/or services an economy can import when all productive resources are fully employed. D.It shows the minimum number of goods and/or services a country can export when all productive resources are fully employed.

Explain the difference between imports and exports. A Explain the difference between imports and exports. A.There is no difference between imports and exports. B.Exports are the goods and services a nation produces and sells to other nations; imports are the goods and services a nation buys from other nations. C.Imports are the goods and services a nation produces and sells to other nations; exports are the goods and services a nation buys from other nations. D.Imports are the goods and services a nation produces and sells to other nations; exports are the country's ability to produce more of a given product than can another country.

What is opportunity cost. A What is opportunity cost? A.The cost of the next best alternative use of money, time, or resources when one choice is made rather than another B.The market value of the next best alternative use of money, time, or resources when one choice is made rather than another C.The comparative advantage of a product when it is produced at the lowest possible market value D.The absolute advantage of a product when it is produced at the lowest possible market value

What are other gains from trade that benefit all nations. A What are other gains from trade that benefit all nations? A.Faster economic growth B.Increased political stability C.Greater world output D.All of the above

What is the significance of Adam Smith's Wealth of Nations. A What is the significance of Adam Smith's Wealth of Nations? A.It was identical to prevailing economic thought at the time. B.It was a departure from comparative advantage. C.It was a departure from absolute advantage. D.It was the first writing that said a country should import products if they could be made more cheaply abroad than at home.

Alpha can produce 40 units of coffee or 8 units of cashew nuts Alpha can produce 40 units of coffee or 8 units of cashew nuts. Beta can produce 6 units of coffee or 6 units of nuts. Which statement is accurate with regard to the opportunity cost of production? A.Alpha's opportunity cost of producing 1 unit of coffee is 8 units of nuts. B.Beta's opportunity cost of producing 1 unit of nuts is 8 units of coffee. C.Alpha's opportunity cost of producing 1 unit of cashew nuts is 5 units of coffee. D.Beta's opportunity cost of producing 8 units of nuts is 6 units of coffee.

Why do you think nations trade with each other? Reflection Why do you think nations trade with each other?

Bell Work Why do you think one nation might want to restrict trade with another nation?

In Lak’ech by Luis Valdez Tu eres me otro yo Si te hago daño a ti, Me hago daño a mi mismo Si te amo y respeto Me amo y respeto yo You are my other me If I do harm to you, I do harm to myself If I love and respect you I love and respect myself

Bell Work Why do you think one nation might want to restrict trade with another nation?

Restricting International Trade Historically, trade has been restricted through tariffs (taxes on imports) and quotas (limits on imports). Protective tariffs protect less-efficient domestic industries from being undersold by foreign industries, while revenue tariffs generate revenue for the government without actually prohibiting imports. Quotas are typically used to reduce the total supply of a product to keep prices high for domestic producers. Other barriers to international trade include embargoes, inspections, licenses, health concerns, and nationalism and culture.

Arguments for Protection Protectionists claim that without trade barriers, a country could become so specialized that it would become too dependent on other countries, which might result in severe shortages and even a decrease in national security in time of war. The infant industries argument is that new or emerging industries should be protected from foreign competition until they are able to compete against established industries in other countries. Protectionists claim that tariffs and quotas protect domestic jobs from cheap foreign labor. Protectionists claim that limiting imports will keep American money in the United States. Protectionists believe that restrictions on imports reduce trade deficits, helping the balance of payments. Some countries protect certain products because of national pride.

The Free Trade Movement During the Great Depression, the United States instituted one of the highest tariffs in history, but when other countries did the same, international trade nearly stopped—the high tariffs hurt more than they helped. A most favored nation clause is a provision that allows a third country to benefit from the same tariff reductions the United States negotiates with another country. The General Agreement on Tariffs and Trade (GATT) of 1947 and the Trade Expansion Act of 1962 helped reduce tariffs and import quotas. GATT was replaced by the World Trade Organization (WTO), which organizes trade negotiations and provides technical assistance and training for developing countries. The North American Free Trade Agreement (NAFTA) reduces tariffs and quotas among Canada, Mexico, and the United States.

Tariffs and Protectionism https://www.youtube.com/watch?v=Gr- Ld7DnBZQ

Trade Barriers Activity Different Kinds of Restrictive Trade Policies The Mexican Truck Controversy The “Bad Tomato Law”

Do you think trade barriers can ever be justified? Why or why not? Reflection Do you think trade barriers can ever be justified? Why or why not?

For most of the 1900s, the world depended on fixed exchange rates. Financing International Trade Foreign exchange consists of the foreign currencies used by countries to conduct international trade. The foreign exchange rate is the price of one country’s currency in terms of another country’s currency. For most of the 1900s, the world depended on fixed exchange rates. When the United States stopped redeeming foreign-held dollars for gold, the world monetary system shifted to flexible exchange rates. Flexible exchange rates are determined by the forces of supply and demand.

Trade Deficits and Surpluses When the value of imported products exceeds the value of exported products, a country has a trade deficit; when the value of exported products exceeds the value of imported products, a country has a trade surplus. The trade-weighted value of the dollar is an index that shows the strength of the dollar against a group of major foreign currencies. When the dollar weakens, export industries benefit and import industries suffer; the reverse is true when the dollar strengthens. There is no net gain to the economy by having either a strong or a weak dollar, because in either case, while one sector of the economy is hurt, another is helped.

Crash Course: Imports, Exports and Exchange Rates https://www.youtube.com/watch?v=geoe- 6NBy10

Chapter 17 Review and Practice Answer questions 1 – 16 on pp. 517-518 Extra credit questions 20- 22