TRADE

The oldest, simplest form of trade is called bartering The oldest, simplest form of trade is called bartering. (Trading one good for another.)

Voluntary trade happens when both buyer and seller expect to gain from trading with each other.

Specialization Specialization is when a nation concentrates on producing just a few kinds of goods.

Specialization By producing only a few kinds of goods, countries become VERY good at production, and can make things much more cheaply.

Specialization ….allows countries to produce their products much more cheaply and in less time…

Specialization ENCOURAGES TRADE BETWEEN COUNTRIES.

Countries often set up trade barriers. Trade barriers hold back and slow down trade. Why? So countries can produce their own goods instead of importing them.

Three kinds of trade barriers: 1) tariff – a tax placed on imported goods If the U.S. placed a $5,000 tariff on imported Japanese cars that Americans had to pay, would Americans buy more or less Japanese cars?

Three kinds of trade barriers: 2) quotas – set the amount of a product that can come into a country The U.S. can say “We will only allow 1,000 Japanese cars to come into the U.S.” This would help the American auto industry.

Three kinds of trade barriers: 3) trade embargoes – don’t allow trade at all with another country America doesn’t allow trade with North Korea because it is America’s enemy.