unit 4 – international economics. standard ssein1 the student will explain why individuals,...
TRANSCRIPT
![Page 1: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/1.jpg)
Unit 4 – International Economics
![Page 2: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/2.jpg)
Standard
SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services.
a. Define and distinguish between absolute advantage and comparative advantage.
b. Explain that most trade takes place because of comparative advantage in the production of a good or service.
c. Explain the difference between balance of trade and balance of payments.
![Page 3: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/3.jpg)
What is Trade?
The voluntary exchange of goods/services
Also known as commerce
![Page 4: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/4.jpg)
Why Trade?
Resources are not distributed equally around the globeLand – agriculture vs. oilLabor – high literacy rate = skilled
workforceCapital – factories, infrastructure(Entrepreneurship)
![Page 5: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/5.jpg)
Trade
Because countries differ in resources, they differ in the production of g/s
Leads to specialization Specialization – producing certain g/s
rather than what you need
Do what you are good at…trade for what you’re not!
![Page 6: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/6.jpg)
Trade
Countries then rely on each other for the production of g/s.
This is known as interdependence.
![Page 7: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/7.jpg)
Absolute vs. Comparative Advantage Absolute Advantage – when a
nation/person can produce more of a g/s with given resources
Who has the absolute advantage?
Pizza Salads
9 36
6 12
Nino
Tony
![Page 8: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/8.jpg)
Comparative Advantage – the ability to produce most efficiently given all the other products that could be produced
Specialization in what you do best given the resources available
![Page 9: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/9.jpg)
Opportunity cost determines comparative advantage.
Lower opportunity cost is where you have comparative advantage.
Who has the comparative advantage in Pizza? Salads?
(Opportunity Cost of a)
Pizza(Opportunity Cost of a)
Salad
4 salads ¼ pizza
2 salads ½ pizza
Nino
Tony
![Page 10: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/10.jpg)
International Trade and Comparative Advantage
Cheese Wheat
United States 3 12
France 2 4
Which country has the absolute advantage in cheese? Wheat?
Which country has the comparative advantage in cheese? Wheat?
Would these countries benefit from trade?
![Page 11: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/11.jpg)
US has absolute advantage in both cheese and wheat. (They produce more than France.)
![Page 12: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/12.jpg)
France has the comparative advantage in cheese. (They produce cheese more efficiently. They have a lower opportunity cost…don’t have to sacrifice as much wheat as the US.)
(Opportunity Cost of) Cheese
(Opportunity Cost of) Wheat
United States 4 units of wheat
¼ unit of cheese
France 2 units of wheat
½ unit of cheese
![Page 13: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/13.jpg)
The United States has a comparative advantage in the production of wheat.( They produce it more efficiently. The opportunity cost of producing wheat is lower…give up less cheese than France.)
(Opportunity Cost of) Cheese
(Opportunity Cost of) Wheat
United States 4 units of wheat
¼ unit of cheese
France 2 units of wheat
½ unit of cheese
![Page 14: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/14.jpg)
Barriers to Trade
Most countries have some sort of trade restrictions which prevents foreign goods from moving freely into the country
Most common types: tariffs, quotas The idea is to “protect” domestic
industries
![Page 15: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/15.jpg)
Protectionism
The use of trade barriers to protect industries from foreign competition
Ex. US Steel (tariff)
![Page 16: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/16.jpg)
![Page 17: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/17.jpg)
![Page 18: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/18.jpg)
![Page 19: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/19.jpg)
Tariff: Tax on imported goodsUS Steel
Quota: a limit on the amount that can be imported
![Page 20: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/20.jpg)
Embargo
Boycotting trade with another country Typically for political reasons
Ex. Trade embargo with Cuba
![Page 21: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/21.jpg)
![Page 22: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/22.jpg)
![Page 23: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/23.jpg)
Other Barriers to Trade
Standards – certain requirements set by governments that must be met in order to import a good (sometimes too strict)
![Page 24: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/24.jpg)
![Page 25: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/25.jpg)
![Page 26: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/26.jpg)
![Page 27: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/27.jpg)
![Page 28: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/28.jpg)
![Page 29: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/29.jpg)
![Page 30: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/30.jpg)
Subsidies – payments by a government to a business that helps keep it going (thus preventing trade at fair market prices)Canada and softwood timber
![Page 31: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/31.jpg)
![Page 32: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/32.jpg)
Free Trade Agreements
Trading Blocks – countries who have agreed to limit or restrict trade barriers
NAFTA – North American Free Trade AgreementGoal is to eliminate all tariffs/trade
barriers between Canada, United States, and Mexico by 2009
![Page 33: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/33.jpg)
![Page 34: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/34.jpg)
![Page 35: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/35.jpg)
EU – European Union Group of (Western)
European countries that abolished trade restrictions among member countries
Replaced individual currencies with the Euro
Very competitive with the US dollar
![Page 36: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/36.jpg)
ASEAN – Association of Southeast Asian NationsPromotes economic and social growth10 member countries including
Philippines, Thailand, VietnamGoal is to complete free trade
agreements with Japan, China, India, South Korea, Australia, and New Zealand by 2013
![Page 37: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/37.jpg)
![Page 38: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/38.jpg)
Exchange Rates
The value of a foreign nation’s currency in terms of the home nation’s currency
Exchange rates fluctuate on a daily basis
![Page 39: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/39.jpg)
Tuesday, October 02, 2007
1 USD in USD
Australian Dollar 1.13045 0.884603
British Pound 0.489788 2.0417
Canadian Dollar 1.0002 0.9998
Chinese Yuan 7.5093 0.133168
Euro 0.706065 1.4163
Hong Kong Dollar 7.7625 0.128824
Indian Rupee 39.65 0.0252207
Japanese Yen 115.83 0.00863334
Mexican Peso 10.9101 0.0916582
South African Rand 6.9091 0.144737
South Korean Won 915.7 0.00109206
Swiss Franc 1.175 0.851064
Downloaded from http://www.x-rates.com
![Page 40: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/40.jpg)
Appreciation – an increase in value of a currency
“Strong” Ex. Strong US dollar…
Increase importsDecrease exports
![Page 41: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/41.jpg)
Depreciation – a decrease in the value of a currency
“Weakening” Ex. Weak US dollar…
Decrease importsIncrease exports
![Page 42: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/42.jpg)
Calculating Exchange Rates
If converting to US dollars…
Foreign Currency
Foreign Currency per dollar
![Page 43: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/43.jpg)
Practice
A new sweater in England costs £50. What is the cost in US dollars?
A dinner in France costs €25. What is the cost in US dollars?
A hotel room in Japan costs ¥20,000. What is the cost in US dollars?
![Page 44: Unit 4 – International Economics. Standard SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services. a. Define](https://reader034.vdocuments.us/reader034/viewer/2022051621/5697bf881a28abf838c89174/html5/thumbnails/44.jpg)
Balance of Trade vs. Balance of Payments
Balance of Trade: the relationship between a nation’s imports and exports
Balance of Payments: the financial record of all financial payments between countries Tracks the flow of money in or out of a
country