Natural Resources & Trade Impact on Country’s Economy

What is TRADE? The voluntary exchange of goods and services among people and countries.

The Production Process + = + Human Resources Capital Resources Natural Resources Goods and Services

Specialization Specialization – countries or people skilled at producing specific goods or services. EXAMPLE: The U.S. depends on Japan for VCRs and televisions, on Brazil for coffee, and on the Middle East for oil. The countries, in turn, depend on the U.S. for various products

Free Trade vs. Trade Barriers Nations can trade freely with each other or there are trade barriers. Free Trade: Nothing hinders or gets in the way of two nations trading with each other. Sometimes countries complain about trade. They say that too much trade causes workers to lose jobs. Therefore, countries sometimes try to limit trade by creating trade barriers.

Economic Trade Barriers The most common types of trade barriers are tariffs and quotas. A tariff is a tax on imports (imports are goods purchased from other countries and exports are goods sold to other countries). A quota is a specific limit placed on the number of imports that may enter a country. Another type of trade barrier is an embargo. a complete trade block for a political purpose

Benefits of Trade Barriers Most barriers to trade are designed to prevent imports from entering a country. Trade barriers provide many benefits because they protect homeland industries from competition. protect jobs. help provide extra income for the government. increase the number of goods people can choose from. decrease the costs of these goods through increased competition.

Gross Domestic Product (GDP) Measuring Country’s Income GDP measures the market value (country’s income) of the final goods and services produced in an economy in a year. GDP measures both income and output. Income - everyone’s earnings in the economy Output - total expenses on goods and services