1. Define Specialization: Producing a few types of goods and services instead of producing a wide variety of goods and services

2. Describe 3 reasons why countries choose to specialize in producing certain products: CLIMATE : the weather must be right to make/grow the products GEOGRAPHY: must have land, terrain, natural resources to make the products HUMAN RESOURCES: must have education and skills to make prod the products CAPITAL GOODS: must have the tools to make the products

3. Give two examples of specialization (ex 3. Give two examples of specialization (ex. Japan specializes in producing electronics and automobiles): a. Saudi Arabia specializes in producing oil. b. China specializes in manufactured goods (ex. clothing).

4. What is a potential problem of over-specialization (ex 4. What is a potential problem of over-specialization (ex. If Kenya only produced tea, what would happen if the tea crop was destroyed?): Kenya would have no crops to trade with other countries and its GDP would go down.

5. What does it mean for countries to be interdependent? Interdependence occurs when people and nations depend on one another to provide the goods and services that they want. The more people specialize and trade, the more interdependent they become.

6. Give an example of interdependence. Farmers depend on merchants to sell their crops. Merchants depend on farmers to give them crops to sell in their stores.

7. Why do countries trade with each other? Countries trade because they are more interdependent today due to specialization. They trade goods & services they specialize in for goods & services they want/need from other countries. They trade because they expect to benefit.

8. Define exchange rate: A system for determining the value of one country’s money in terms of another country’s money

9. Why is there a need for an exchange rate when countries trade 9. Why is there a need for an exchange rate when countries trade? (hint: think about what would happened if there was NO exchange rate) An exchange rate is needed for international trade b/c it makes trade b/w countries easier. Without a system for exchanging one country’s currency for another, it would be difficult or even impossible to trade since countries would not know how much their products are worth in other countries.

10. List and describe three barriers to trade. a. EMBARGO: when a country or countries refuse to trade with a certain country (ex. OPEC embargo on the United States). b. QUOTA: a limit on the amount of goods imported into a country c. TARIFF: taxes on goods imported into a country

11. Define G.D.P.: the total value of all the goods and services produced in a country in one year

12. Define G.D.P. per capita: the average value of goods and services available to each person in a country

13. In your own words, what can GDP and GDP per capita tell us about a country’s economy? GDP tells us if a country’s economy is growing or shrinking, healthy or sick. It also tells you if a country has a low, middle, or high income. GDP per capita gives you hints about an individual’s standard of living.

14. What are three ways in which a country can increase its productivity, and therefore its GDP? Then give an example of each. a. INCREASE AMOUNTS OF CAPITAL GOODS (ex. more shovels) b. IMPROVE CAPITAL GOODS (IMPROVE YOUR TECHNOLOGY) (ex. instead of shovels, use tractors) c. IMPROVE THE QUALITY OF LABOR (INVEST IN HUMAN RESOURCES, IMPROVE EDUCATION) (ex. educate a farmer on how to better grow his crops)

15. What is the relationship between education and GDP per capita? There is a direct relationship between education and GDP per capita. Education is costly so if a country has a low GDP per capita, then the country will most likely have a low rate of education, and vice versa.