SSEIN1: The student will explain why individuals, businesses, and governments trade goods and services. SSEIN2: The student will explain why countries sometimes erect trade barriers and sometimes advocate free trade.

 You have two items on your desk – a Passing the Georgia End of course Test book and a note taking sheet on entitled “Intro to International Economics.  First, we will discover what International Economics entails  Second, we will do the practice work in the EOCT book. Turn to page 73 and do the review on pages 91-93

 Increases the amount and variety of goods available to all nations; increases efficiency

 The ability of a nation or region to produce more of a certain product than another country of region

 The ability of one country/region to produce a good at less of an opportunity cost than another country/region

SugarFertilizer United States80100 Nicaragua7050 TOTAL150 Which country has an absolute advantage in producing sugar? Which country has an absolute advantage in producing fertilizer? Which country has a comparative advantage in producing sugar? Which country has a comparative advantage in producing fertilizer?

 balance of trade = exports – imports  A positive balance of trade is a trade surplus  (If a nation imports $1 million worth of goods/services and exports $4 million worth of goods/services; trade surplus of $3 million  A negative balance of trade is a trade deficit  (If a nation imports $2 million worth of goods/services and exports $1 million worth of goods/services; trade deficit of -$1 million

 Looks at all transactions between households, firms, and govts. of one nation and those of other nations  Balance of payments = credits – debits  Ideally, the balance of payments should be zero or a positive number

 Attempts to limit imports into a country  “Protectionism” – govt policy

#1: Tariffs (tax on certain imports)  Make goods more expensive to buy  Reduces demand for foreign goods => helps nation’s own industries compete  Increases govt. revenue => reduces a nation’s budget deficit

#2: Quotas (limit on the # of certain products that can be imported from another country)  Example: U.S. forced a limit on the number of cars that could be imported from Japan

#3: Standards  Rules about the quality of imports  If imports don’t pass a nation’s standards, they will not be accepted  Example: U.S. might ban the import of fruit that has been sprayed with certain pesticides

#4: Subsidies  Direct financial aid to certain domestic industries  Lower a firm’s production costs and allow domestic firms to compete with lower-cost imports

#5: Embargo  Total ban on one or more products from a particular nation  Often politically motivated => pressures other govts. to change behavior  Example: U.S. embargo on Cuban imports (Fidel Castro seized U.S. property and instituted communism)

 Improves economic efficiency  Offers consumers of all nations a wide variety of the lowest prices

 Protection of national security  Protection of “infant” industries  Protection of jobs

#1: North American Free Trade Agreement (NAFTA)  United States, Canada, and Mexico  Gradual elimination of trade barriers between these countries

#2: European Union (EU)  27 European nations  Shared currency called the “euro”

#3: Association of Southeast Asian Nations (ASEAN)  Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Cambodia, Laos, Myanmar, and Vietnam  Elimination of most tariffs in this trading region

 Do Now: Make a graphic organizer similar to the ones below by defining each term and providing an of example of each: Absolute Advantage Comparative Advantage definition example