international economics lesson 4: balance of trade & balance of payments
TRANSCRIPT
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International Economics
Lesson 4: Balance of Trade & Balance of Payments
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In Your Groups
• Answer (in written form) the following questions:
• How do American producers like to be paid?
• How do French producers like to be paid?
• Do American producers generally accept Euros as payment?
• Do French producers want to sell their products (like wine and cheese) to people in other countries?
• What does the word “imports” mean?
• What does the word “exports” mean?
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One More Question
When U.S. consumers buy French goods, what do the French do with our dollars?
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Balance of Trade
Exports Minus Imports
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More Vocabulary
Trade Surplus: When Exports > Imports
Trade Deficit: When Imports > Exports
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Foreigners with US dollars will use those dollars to buy
American goods or invest in American companies.
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Balance of Payments
Dollars entering the country minus dollars leaving the country.
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The balance of payments is always zero.
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Thriftville vs. Squanderville
A Class Activity
In A Land With No Banks
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Thriftville vs. Squanderville• Exports:_______• Imports:_______• BOT:_______• Stock sold to foreigners
($ amount):_______• Foreign stock
purchased ($ amount):_______
• BOP:_______
• Exports:_______• Imports:_______• BOT:_______• Stock sold to foreigners
($ amount):_______• Foreign stock
purchased ($ amount):_______
• BOP:_______
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Take Note• Squanderville ran a trade deficit because they imported
more than they exported, and their balance of trade was negative.
• Thriftville ran a trade surplus because they exported more than they imported, and their balance of trade was positive.
• Thriftville consumers assumed ownership of larger portions of Squanderville’s businesses.
• Thriftville is in a better long-run position, as their investments will provide them with additional income.
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If the USA exports $3 billion worth of goods/services, and imports $4
billion worth of goods/services, what is our balance of trade?
• A) -$1 billion
• B) $0
• C) $1 billion
• D) $3 billion
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If the USA exports $3 billion worth of goods/services, and imports $4
billion worth of goods/services, then the USA is running a
• A) trade surplus
• B) trade deficit
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In 1998, what was the dollar value of goods and services purchased from China by Americans?
• A) $14 billion B) $71 billion
• C) $85 billion D) $57 billion
Top Ten Trading Partners of the United States (1998, in billions of dollars)
Country
Exports To
Imports from
Canada $160 $175 Japan $58 $122 Mexico $79 $95 China $14 $71 Germany $27 $50 United Kingdom $39 $35 Taiwan $18 $33 France $18 $24 South Korea $16 $24 Singapore $16 $18
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Which of the following statements is incorrect?
• A) The U.S. ran a trade deficit with Japan of $64 billion.• B) The U.S. balance of trade with Japan was -$64 billion.• C) The U.S. ran a trade surplus with the United Kingdom
of $4 billion.• D) The U.S. balance of payments with France was -$6
billion.
Top Ten Trading Partners of the United States (1998, in billions of dollars)
Country
Exports To
Imports from
Canada $160 $175 Japan $58 $122 Mexico $79 $95 China $14 $71 Germany $27 $50 United Kingdom $39 $35 Taiwan $18 $33 France $18 $24 South Korea $16 $24 Singapore $16 $18
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With which country was the U.S. running the biggest trade deficit?
• A) Canada• B) Japan• C) China• D) United Kingdom
Top Ten Trading Partners of the United States (1998, in billions of dollars)
Country
Exports To
Imports from
Canada $160 $175 Japan $58 $122 Mexico $79 $95 China $14 $71 Germany $27 $50 United Kingdom $39 $35 Taiwan $18 $33 France $18 $24 South Korea $16 $24 Singapore $16 $18