International Trade

what are the reasons for international trade?

unequal distribution of resources and specialization

imports

good brought into the country

exports

goods sent to other countries

why do countries specialize in certain products when they trade

to concentrate their efforts on producing a few goods and services instead of everything they need

absolute advantage

the ability to produce more of a given product than someone else

comparative advantage

The ability of a country to produce a good at a lower opportunity cost than another country can.

law of comparative advantage

a nation is better off when it produces goods and services for which it has a comparative advantage

trade surplus

Exports exceed imports

trade deficit

An excess of imports over exports

is a trade surplus or deficit better for a country

surplus

balance of trade

relationship between a countries exports and imports

positive or negative balance of trade

positive

what would a positive or negative balance of trade say about the economy of a country

the value of their currency

balance of payment

A measure of the total flow of money into or out of a country.

positive or negative balance of payment

positive

what does a negative balance of payment say about a country

in debt

what is the purpose of a trade barrier

a way to stop or slowdown certain foreign products from freely coming into a country

what is a trade barrier also called

trade restriction

protectionism

helps protect the economy and certain industries of a country from foreign competition

quota

a limit on the amount of a good that can be imported

voluntary restriction

a country voluntarily limits the number of a product they ship to a country

tariff

a tax on imported goods

embargo

a government prohibits the import of an item

what country have we had the longest embargo against

cuba

what are some problems created by trade barriers

1.raide cost of foreign goods 2.trade wars 3.hurt economies by making them inefficient and unresponsive

free trade zone

a region where a group of countries agree to reduce or eliminate trade barriers

NAFTA

north American free trade agreement, eliminate trade barriers between US Canada and Mexico

EU

European Union, trade organizations made up of European nations

drawback of trade agreements

,ay lead to job loss because companies will relocate to the country in which it costs the least to produce their product

exchange rates

the worth of the countries money in terms of another country

appreciation

the value of the dollar increases

depreciation

the value of the dollar decreases

what is the effect on the US when its dollar strengthens

we can buy foreign products cheaper, but foreign countries want buy as many of our products

what is the effect on the US when its dollar weakens

foreign countries will buy more of our products, but we cant buy as much foreign products