1. Final Exam Review Unit 2: International Economics

2. 1. Explain the Law of Comparative Advantage A country is better off producing goods and services that they have a lower opportunity cost than other countries

3. 2. Explain what NAFTA is, what it stands for, and which nations are a part of it North American Free Trade Agreement No tariffs on trade between Canada, Mexico, and the United States

4. 3. Explain what is happening when a trade surplus occurs Trade Surplus: When a nation exports more goods than it imports

5. 4. What is the European Union and how does it make trade in Europe easier? The European Union is an economic group of European nations Goal: to create a single continental free trade bloc among its members

6. 5. List the major trading partners of the United States Canada Mexico Japan China European Union

7. 6. Define what a tariff is and explain why nations would have tariffs on certain goods Tariff: tax on imported goods Effect: less imported goods, less competition, and higher prices

8. 7. Explain the concept of balance of trade Balance of trade: The relationship between a nation's imports and its exports Can be positive, negative, or zero

9. 8. Explain what happens to the value of a currency appreciates and what happens when it depreciates Appreciation: when the value of a currency increases Depreciation: when the value of a currency decreases