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Chapter 18 International Trade - Mr Brennan's Website

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Chapter 18 International Trade - Mr Brennan's Website Powered By Docstoc
					    CHAPTER 18



     International Trade
     SECTION 1: Specialization and Interdependence
     SECTION 2: Foreign Exchange and Currencies
     SECTION 3: Cooperation and Trade Barriers




1
    SECTION 1
    Specialization and Interdependence



      Objectives:
      l How does specialization encourage trade?
      l How can absolute advantages influence
        economic choices?
      l How can comparative advantages affect a
        nation’s economy?


2
    SECTION 1
    Specialization and Interdependence



      How specialization promotes trade:
      l allows nations to become efficient in the
        production of a few goods and services
      l encourages countries to trade their goods and
        services for those they cannot or do not
        produce well


3
    SECTION 1
    Specialization and Interdependence

      How absolute advantages can affect
      economic choices:
      l by promoting overspecialization
      l by increasing competition in prices for goods
        and services
      l leading to an examination of comparative
        advantages


4
    SECTION 1
    Specialization and Interdependence

      How comparative advantages can
      affect economic choices:
      l encouraging and determining specialization
      l leading to production trade-offs
      l creating expansion of production
        possibilities
      l providing trading benefits


5
    SECTION 2
    Foreign Exchange and Currencies



     Objectives:
     l Why are foreign exchange rates necessary?
     l How does a nation determine its balance of
       payments?
     l What is the significance of the balance of
       trade?


6
    SECTION 2
    Foreign Exchange and Currencies



     Purposes of foreign exchange rates:
     l to determine the value of one country’s
       currency in relation to another country’s
     l to permit international trade and payment for
       goods and services traded




7
    SECTION 2
    Foreign Exchange and Currencies

     How a nation determines its balance
     of payments:
     l by recording all payments and receipts
       occurring between its and other nations’
       residents, businesses, and governments
     l by looking at the balance of trade




8
    SECTION 2
    Foreign Exchange and Currencies



     Significance of the balance of trade:
     l important factor in determining a nation’s
       overall balance of payments
     l determines trade surpluses and deficits




9
     SECTION 3
     Cooperation and Trade Barriers


      Objectives:
      l Why do nations impose trade barriers?
      l What are the key arguments made in favor of
        free trade?
      l What types of agreements indicate that
        nations are following a policy of
        cooperation?

10
     SECTION 3
     Cooperation and Trade Barriers


      Reasons nations impose trade barriers:
      l to protect domestic industries and jobs from
        foreign competition
      l to maintain its standard of living
      l to prevent overspecialization
      l to promote fairness
      l to protect national security
11
     SECTION 3
     Cooperation and Trade Barriers


      Key arguments for free trade:
      l increases competition
      l leads to better-quality goods at better prices
      l promotes economic growth




12
     SECTION 3
     Cooperation and Trade Barriers

      Indicators of international
      cooperation:
      l reciprocal trade agreements
      l regional trade organizations, such as the EU,
        CARICOM, ASEAN, and MERCOSUR
      l international trade agreements, such as
        GATT, the WTO, and NAFTA
      l multinational corporations

13
     CHAPTER 18
     Wrap-Up
      1. Why might a nation practice specialization?
      2. Explain the difference between absolute advantage
         and comparative advantage.
      3. What effect does currency depreciation have on a
         nation’s exports and imports?
      4. What are the three principal types of trade barriers?
         Explain how each works to restrict international
         trade.
      5. How has the advent of e-commerce affected trade?
14

				
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