1. International Trade
Section 7.1

2. Objectives
How the concepts of absolute and comparative advantage determine what countries produce.
What businesses export and import.
How foreign exchange rates affect imports and exports.
How protectionist means reduce the volume of imports and raise prices.

3. International Trade
Consists of the exchange of goods and services by different countries

4. Why Do Countries Trade? Ideas?
When a country cannot produce a good it wants.
When a country has an advantage over other countries in producing particular goods or services.
Absolute Advantage—the ability to produce more of a good than another producer with the same quantity of inputs.
Honduras vs Great Britain example pg 155
Comparative Advantage—producers should produce the goods they are most efficient at producing and purchase from others the goods they are less efficient at producing.

5. Question
What factors give the United States an absolute advantage in wheat production? (Don’t over think)
Soil, Climate, Abundance of Land, Farming Equipment

6. Exports
Exports are goods and services that are sold to another country.
Companies export to increase sales and diversify their sources of revenue.
Before companies export to another country, they make sure there is sufficient demand for their product in that country.
Facts:
US is the largest exporter and importer in the world
95% of the world’s consumers live outside the US

7. Imports
Imports are goods and services that are purchased from another country.
Companies import the materials that make up a product.
Example: US appliance companies import steel from Japan
Companies also import products to be resold in their own country.

8. Foreign Exchange
Companies pay for imports with the currency of the country from which the product is imported.
Companies purchase foreign currency from banks, which convert each currency into dollars.
The value of one currency in terms of another is the foreign exchange rate.
Exchange rates fluctuate daily. Example: pg 159

9. Protectionism Tariffs—a tax on imports.
International trade may hurt domestic producers who have trouble competing with foreign companies. Sometimes governments impose protectionist measures.
Tariffs—a tax on imports.
Quotas—restriction on the quantity of a good that can enter a country.
Embargoes—a total ban on the import of a good from a particular country.

10. Activity
Debate:
Should the US impose protective laws to limit foreign trade?
Respond to this question in your notes.

11. Section 7.1 Assessment Complete and Submit at the end of class!
Fact & Idea Review #1-4
Critical Thinking #1and 2
Assessing Math Skills Problem
Complete and Submit at the end of class!