1. Chapter 37, 38- Trade Barriers/Self Correcting Balance of Trade
11/28/2018
Chapter 37, 38- Trade Barriers/Self Correcting Balance of Trade
Objective – Students will be able to answer questions regarding a self correcting balance of trade and trade barriers.
SECTION 1
© 2001 by Prentice Hall, Inc.

2. Self-correcting Balance of Trade$  X  M  X  M 
.: XN 
.: XN  $ 

3. Trade Barriers
Trade barriers (tariffs, quotas, embargos) have costs and benefits, but in general they are considered by economists to inefficiently distort markets. In general, they…
Are used to protect domestic producers.
Increase prices on imports, increasing domestic sales.
Give domestic buyers less buying options.
Are sometimes used in order to protect “infant” industries as well as essential industries, to protect domestic wages, and to protect domestic firms from foreign “dumping”.
Can reduce unemployment in protected domestic sectors, but will cause real incomes in other producing countries to fall.

4. Section 1 Assessment
Describe how a favorable and unfavorable trade balance corrects itself.
Describe the costs and benefits of trade barriers.

5. Summary: In a paragraph, describe what you have learned today.