 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.
2.
3.
4.
Did your group have all of the resources
needed to complete the tasks?
How did you get the things that you
needed?
Would you have been able to complete
the activity alone?
Are there any negative aspects to
trading with foreign nations?