Why do countries trade with each other?

Every country in the world has a limited amount of resources.

Interdependent- To depend on others in order to function.

Favorable Balance of Trade- A country exports more than it imports.

Unfavorable Balance of Trade- A country imports more than it exports.

Embargo- The refusal to trade with another country.

1. Which of the following would least affect the overall U.S. economy?

A. Terrorists successfully blow up a major U.S. oil pipeline and several major oil refineries.

B. The Supreme Court upholds a ruling that a huge corporation has established an illegal monopoly in a revolutionary new technology market and must be broken up.

C. Several airline pilots resign b/c they are tired of working in an unstable industry.

D. The president signs a bill lowering tariffs, thereby making it easier for products from other countries to be sold in the U.S.

US Economy• Strongest and most influential in the world• However, because we have limited resources we cannot

produce everything we need Globally interdependent

• People and nations all over the world depend upon one another for many goods and services

• Globalization– World wide connection between

countries.

• Exports– Goods that a nation sells to other

countries.

• Imports – Goods that a nation buys from other

countries.

• Favorable balance of trade– When a country is exporting more

than it imports.– A nation is receiving payment for

more that it is spending on foreign products.

• Unfavorable balance of trade– When a nation’s imports exceed its

exports.

• Absolute advantage– When one country produces a

certain good better and more efficiently than anyone else.

When a country can do a better job producing just about anything than the nation with which it trades, but in order to focus on producing the goods it is most efficient at, the country finds it in its best interest to import certain products rather than producing them itself.

• Exchange Rate– How much a given amount

of money is worth in another nation.

• Tariff– Tax on imported goods.– Used by governments to

make domestic products more competitive

• Embargo – Sanctions against a

country that prevent two countries from trading with one another.

– 1973 OPEC oil embargo

• Australia 1.02• Canada 1.00• China 6.66• Euro 0.76• India 45.14• Israel 3.62• Japan 83.90• South Korea

1,140.50• Mexico 12.45• United Kingdom

0.64

World Trade Organization (WTO) International organization that establishes trade and resolves disputes

European Union (EU) Trading union made up of 25 European countries

International Monetary Fund (IMF) Oversees international financial system by monitoring exchange rates

United Nations (UN) Int. diplomatic body that attempts to use diplomacy to resolve economic and political issues

North American Free Trade Agreement (NAFTA)

Trade agreement between Mexico, Canada & US. Allows US businesses greater access to foreign markets but also results in the loss of US jobs

Developed Nations• Countries that have

greater wealth and a high standard of living

Developing Countries • Poorer nations that

depend on foreign aid such as $, food, tech, capital, etc

World Bank• Provides advice and $

to developing nations

Human Rights• The rights that every

human being possesses

• At times, the US has restricted trade with foreign countries because of their oppressive policies towards their people. Ex: Cuba This policy however, can

be very inconsistent

1. Did your group have all of the resources needed to complete the tasks?

2. How did you get the things that you needed?

3. Would you have been able to complete the activity alone?

4. Are there any negative aspects to trading with foreign nations?