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International Trade and Its Benefits
Terms in this set (31)
In 2005, what percentage of all goods produced in the US were exported?
FUN FACT #1
A larger amount of goods were imported or purchased from aboard.
Why can it be good to import goods?
Gives Americans products they might not otherwise be able to enjoy.
How do nations solve the problem of scarcity?
Why do nations trade goods and services?
Because they do not have them or are unable to make them cheaply.
the ability of a country to produce a good at lower opportunity cost than another country can.
Comparative Advantage leads nations to...?
What does specialization allow countries to do?
Use their scarce resources to produce items better than any other country.
What things does international trade accomplish?
Creates jobs, and creates new markets.
What does comparative advantage allow foreign countries to do?
Can sell their product more cheaply than companies making the product in their own country.
Why would a government impose trade barriers?
To protect domestic workers and industry.
What are the 2 most common trade barriers used?
Tariffs and Quotas
a tax on an imported good.
set the limits on the amount of foreign goods allowed into a country. (imported)
What is the goal of a tariff?
To make the price of an imported good higher than the price of the same good produced domestically.
Why do countries set quotas?
People want a foreign product so badly that higher prices have little effect on demand.
FUN FACT #2
In general, trade barriers cost more than the benefits gained.
What do most countries try to achieve with other nations?
What trend has the world been seeing lately between nations?
Formation of free trade zones among key trading partners.
What is the EU?
How is trade set up in the EU?
Goods, Services, and even workers flow freely among theses nations because the EU has no trade barriers
in the 1990's the us. Canada, and mexico signed their own free trade agreement, North American Free Trade Agreement.
Opponents of NAFTA
claimed that american workers would loose their jobs because US. plant would move to Mexico (cheaper labor, less regulations, environmental and workers' rights laws ignored.
Supporters of NAFTA
argue that increased trade would stimulate growth and put more low cost products on the market.
FUN FACT #3
Different nations use different currencies as a medium of exchange. US= Dollar Mexico- Peso Japan- Yen
What is the exchange rate? Why is it necessary?
The price of one nation's currency in terms of another country's currency. <definition.
Balance of trade
the difference between the value of nations exports and its imports.
What happens if a nation's currency depreciates? What will a nation most likely do?
the nation will likely export more goods because its products will become cheaper for other nations to buy.
What will happen if a nation's currency appreciates?
export will decline.
What is a trade surplus?
when a countries value of exports exceeds the value of imports, the country has a positive balance of trade. A country is selling more than it is actually buying
When a countries value of imports exceeds the value of exports, the country has a negative balance of trade.
THIS SET IS OFTEN IN FOLDERS WITH...
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