Warm Up #34

1. Warm Up #34 Why does the U.S. trade goods & services with other countries? Explain why or not.

2. Class Confession • We the Senior Class of 2016 will complete ALL of our assignments to best of our abilities and behave appropriately in class. • We will respect all faculty, staff, substitutes, classmates, and especially Mr. Wilcox. • We will graduate on time May 20, 2016 and become productive citizens in society.

3. SSEIN1 Scaffold understanding of the standard(s) and/or element(s). Paraphrase the standard(s) and/or element(s).Rewrite the standard including synonyms or brief definitions in parentheses and in a different color following the key terms found in step 1. The student will be able to explain (clarify) why individuals, businesses (firms), and governments trade (commerce) goods and services.

4. InternationalEconomics International Trading Goods and Services SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services.

5. International Trade • KEY CONCEPT • Economic interdependence involves producers in one nation that depend on producers in other nations to supply them with certain goods and services. • WHY THE CONCEPT MATTERS • Nations choose to produce some things and trade for others. For example, Japan trades for the raw materials it uses to produce automobiles. It then turns around and trades the automobiles for other goods.

6. Benefits and Issues of International Trade • KEY CONCEPTS • Nation’s economic patterns are based on the factors of production it has • patterns change over time; for example, U.S. originally agricultural • Specialization occurs when narrow range of products made • increased productivity and profit • Economic interdependence—reliance on others for products not made

7. Resource Distribution and Specialization • Example: Specialization • Costa Rica exports bananas; has warm, wet climate bananas need • relatively low agricultural wages are beneficial—production is labor intensive • New Zealand exports wool, lamb, and mutton (sheep meat) • has temperate climate, water, open grasslands needed for grazing • has low population density, scientific breeding, mechanized processing

8. When nations specialize in producing the things they can make most cheaply and easily they benefit the most. It depends on their resources. i.e. Climate, metals, etc. Specialization and Trade

9. Why do nations participate in International trade? To increase WEALTH! Consumers get more choices.

11. Absolute and Comparative Advantage • KEY CONCEPTS • Absolute advantage—nation’s ability to make product more efficiently • due to uneven distribution of production factors in different areas • Comparative advantage—ability to produce at lower opportunity cost • absolute cost of product not important, just opportunity cost

12. Absolute and Comparative Advantage • Example: Absolute Advantage • Australia produces more iron ore and steel than China with same labor • Australia has absolute advantage

13. Absolute and Comparative Advantage • Example: Comparative Advantage p. 514 • Law of comparative advantage—countries gain when: • produce items they are most efficient at producing • and are at the lowest opportunity cost • If Australia’s ratio of steel to iron ore is 1:5 tons and China’s is 1:3 • China has comparative advantage in steel production

14. International Trade Affects the National Economy • KEY CONCEPTS • Exports—goods and services produced in one country, sold in others • Imports—products produced in one country, purchased by another • Costs and benefits of international trade vary by nation • economists examine impact of exports and imports on prices and quantity

15. International Trade Affects the National Economy • Impact 1: Exports on Prices and Quantity • If a country begins exporting product, foreign buyers increase total demand • demand curve shifts right, sets higher equilibrium price • Higher prices at home is offset by more jobs and more income • created by production expanded to meet demand

16. International Trade Affects the National Economy • Impact 2: Imports on Prices and Quantity • Imports shift supply curve right, lower equilibrium price • Lower prices lead domestic producers to offer less of product • improve efficiency, worker productivity, customer service • Trade gives consumers increased selection of goods, lower prices • Gives producers new markets, chance for more profits

17. International Trade Affects the National Economy • The United States in the World Economy • U.S. is world’s largest exporter; exports more services than imports • tourism, transportation, architecture, construction, information systems • Also world’s largest importer; imports more goods than it exports • oil and refined oil products, machinery, raw materials • Main trading partners: Canada, China, Mexico, Japan

18. Show What You Know! • Georgia Milestone Practice Questions • International trade benefits ONLY nations that • Export more than they import • Import more than they export • Participate in trade associations • Trade according to the law of comparative advantage

19. Show What You Know! • Georgia Milestone Practice Questions • The ability of one trading nation to make a product more • efficiently than another trading nation is called • Comparative advantage • Favorable balance of trade • Voluntary export restraint • Absolute advantage

20. Show What You Know! • Georgia Milestone Practice Questions • If Country A decides to export some of its televisions to • Country B because the market for televisions in Country • A is already well satisfied, then the • Demand for televisions in Country B would decline • Demand for televisions in Country A declines • Price of televisions in Country A rises • Price of televisions in Country B rises

21. The Difference between absolute advantage and comparative advantage when it comes to international economics

22. The End. • Any Questions? • Any Comments? • Any Concerns? • Any Questions? • Any Comments? • Any Concerns? • Any Questions? • Any Comments? • Any Concerns?

23. Warm Up #35 If we could not trade goods and services from China, Japan, Canada, Brazil, Costa Rica, Taiwan and any other country in the world what do you think would happen economically for the U.S.? Explain your answer. 5 minutes

24. Class Confession • We the Senior Class of 2016 will complete ALL of our assignments to best of our abilities and behave appropriately in class. • We will respect all faculty, staff, substitutes, and classmates, and especially Mr. Wilcox. • We will graduate on time May 20, 2016 and become productive citizens in society.

25. SSEIN1You will be able to explain why countries sometimes erect trade barriers and sometimes advocate free trade.A. Define trade barriers as tariffs, quotas, embargoes, standards, and subsides.B. Identify costs and benefits of trade barriers over time.C. List specific examples of trade barriers.E. Evaluate arguments for and against free trade. Determine and define vocabulary. Identify key terms within the standard. Define each term. _________________________________________ _________________________________________ _________________________________________ _________________________________________ ___________________________________________________________________________________________________________________________

26. Scaffold understanding of the standard(s) and/or element(s).Paraphrase the standard(s) and/or element(s).Rewrite the standard including synonyms or brief definitions in parentheses and in a different color following the key terms found in step 1. Define trade (commerce) barriers (obstacles) as tariffs (taxes),quotas (proportions), embargoes (restrictions), standards (requirements), and subsides (payments). Identify costs (expenditures) and benefits (profits) of trade barriers over time. List specific examples of trade barriers. Evaluate (appraise) arguments for and against free trade

27. InternationalEconomics Trade Barriers SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services.

28. Barriers to Trade • KEY CONCEPTS • Most nations pass trade limit laws to protect domesticindustries • Laws lead to higher prices, economicretaliation by other nations • In long run, industries can only be saved by becoming competitive • Trade restrictions are basically a politicalissue

29. Types of Trade Barriers Trade barrier—law limiting free trade among nations; most mandatory Quota—limits on the amount of a product that can be imported Dumping—sale of product in other country at lower price than at home hurtsdomestic producers; gives consumers lower price Barriers to Trade

30. Barriers to Trade • BMW • Types of Trade Barriers • Tariff—fee charged for goods brought from another country • Revenue tariff—tax on imports, specifically to raise money • rarely used today • Protective tariff—tax on imported goods to protect domestic products • raise price of goods more cheaply elsewhere

31. Barriers to Trade • Types of Trade Barriers • Voluntary Export Restraint (VER)—nation’s self-imposed limit on exports • VER used to avoid a quota or tariff • Embargo—law that cuts most or all trade with a specific country • Informal trade barriers—licenses, environmental, health, safety laws

32. The Impact of Trade Barriers • KEY CONCEPTS • Trade barriers may temporarily save domestic jobs • lack of competition promotes inefficiency, higher prices • Trade limits can lead to a trade war—succession of increasing trade barriers between nations

33. The Impact of Trade Barriers • Impact 1: Higher Prices • Tradebarriers raise prices or keep them high • In 2000, U.S., Japan set tariffs on South Korean semiconductor chips • Korean and domestic chip prices went up in U.S. and Japan • Mabach

34. The Impact of Trade Barriers • Impact 2: Trade Wars • Trade wars often result from disagreements over quotas or tariffs • Can result over other issues • EU banned U.S hormone-treated beef, U.S. set 100% tax on many EU foods • Angus Beef

35. Arguments for Protectionism • KEY CONCEPTS • Protectionism—use of trade barriers to protect domestic industries • Purpose to protect jobs, national security, infant industries *new industries unable to compete with larger, established competitors

36. Arguments for Protectionism • Argument 1: Protects Domestic Jobs? • U.S. workers upset over jobs lost to countries with cheaperlabor • Trade barriers generally protectinefficient production, higher prices • Laid-off voters influenced government to fund job training programs

37. Arguments for Protectionism • Argument 2: Protects Infant Industries? • Protection expected to allow new industries to grow until competitive • This is used by developing nations to keep out goods from developed nations • Some critics say that freedom from competition maintains perpetual (continuous) infancy, therefore the need for perpetual (lasting) support

38. Arguments for Protectionism • Argument 3: Protects National Security? • National security affects industries considered vital (absolutely necessary) for safety • energy industry considered vital by most nations • Political differences exist over which industries are truly vital • 2006 Dubai forced to abandon deal to operate several port facilities • critics doubted security concerns, worried over interference with trade

39. What is the primary reason for corporations leaving the U.S.? Outsourcing Companies move jobs to other nations with lower labor costs.

40. What is a Trade Association? A large free trade area that is formed by one or more tax, tariff, and trade agreements NAFTA North American Free Trade Agreement eliminated or lowered tariffs and other trade barriers between the U.S., Canada & Mexico EU European Union has 25-27 nations and shares currency called the euro. ASEAN Association of Southeast Asian Nations includes 10 nations eliminated tariffs in this trading region.

41. Closure Activity #30 • Imagine that you have been asked to sign a pledge to be patriotic by buying only products made in the United States whenever possible. • Discuss with your partner, why you would or would not sign. Use at least two economic concepts explained in this lesson to support your decision. • 8 minutes to complete and turn in!!

42. Show What You Know! • Georgia Milestone Practice Questions • The effect of trade barriers on domestic industries is to • Decrease motivation for efficiency • Increase motivation for efficiency • Raise workers’ pay • Subsidize imports

43. Show What You Know! • Georgia Milestone Questions • The effect of trade barriers on domestic prices is to • Keep them stable • Lower them • Prevent inflation • Raise them

44. Show What You Know! • Georgia Milestone Practice Questions • Protective tariffs are one kind of • Embargo • Quota • Trade barrier • Trade war

45. Show What You Know! • Georgia Milestone Practice Questions • Which of the following is NOT a trading association? • EU • NAFTA • ASEAN • NATO

46. Warm Up #36 Looking at the projector answer the following questions on your Note Taking Guide.

47. Class Confession • We the Senior Class of 2016 will complete ALL of our assignments to best of our abilities and behave appropriately in class. • We will respect all faculty, staff, substitutes, and classmates, and especially Mr. Wilcox. • We will graduate on time May 20, 2016 and become productive citizens in society.

48. SSEIN3You will be able to explain how changes in exchange rates can have an impact on the purchasing power of individuals in the U.S. and in other countries.A. Define exchange rate as the price of one nation’s currency in terms of another nation’s currency.B. Locate information on exchange rates.C. Interpret exchange tables.D. Explain why, when exchange rates change, some groups benefit and others lose.SSEIN1CC. Explain the difference between balance of trade and balance of payments. Determine and define vocabulary. Identify key terms within the standard. Define each term. _______________________________________ _______________________________________

49. Scaffold understanding of the standard(s) and/or element(s).Paraphrase the standard(s) and/or element(s).Rewrite the standard including synonyms or brief definitions in parentheses and in a different color following the key terms found in step 1. The student will explain how changes in exchange (buying) rates can have an impact (influence) on the purchasing (buying) power of individuals in the U.S. and in other countries. Explain (clarify) the difference between balance (stability) of trade (exchange) and balance of payments (expenses).

50. International Economics Exchange Rates SSEIN3 The student will explain how changes in exchange rates can have an impact on the purchasing power of individuals in the U.S. and in other countries. Explain the difference between balance of trade and balance of payments.