Before Activity
• Think-Pair-Share
– List imports & exports of the U.S.
Importing, exporting, trade relations, and global
currencies are covered in this lesson.
Trading Among Nations
• Domestic business is the making, buying, and
selling of goods and services within a country
• International business refers to business
activities needed for creating, shipping, and
selling goods and services across national
borders; also known as foreign or world trade
• Although the U.S. has many natural resources,
a skilled labor force, and modern production
facilities, American companies and consumers
go beyond our borders to obtain many things
Trading Among Nations
• The U.S. conducts trade with more than 180
countries
• Consumers have come to expect goods and
services from around the world
• What are some of the advantages and
disadvantages of international trade?
Trading Among Nations
Absolute vs. Comparative Advantage
• Absolute advantage exists when a country can
produce a good or service at a lower cost than
other countries
• This may result from an abundance of natural
resources or raw materials in a country
• Ex) South American countries have an absolute
advantage in coffee production, Saudi Arabia
has an absolute advantage in oil production
Trading Among Nations
Absolute vs. Comparative Advantage
• A country may have an absolute advantage in
more than one area
• If so, it must decide how to maximize its
economic wealth
• A country may be able to produce both
computers and clothing better than other
countries
Trading Among Nations
Absolute vs. Comparative Advantage
• The world market for computers may be
stronger than market for clothing
• This means it would be better for the country to
produce computers but to buy clothing from
other countries
• Comparative advantage is a situation in which a
country specializes in the production of a good
or service at which it is relatively more efficient
Trading Among Nations
• Imports – items bought from other countries
• Imports account for the total supply of bananas,
coffee, cocoa, spices, tea, silk, and crude
rubber in the U.S.
• Without foreign trade, many things you buy
would cost more or not be available
• Exports – goods and services sold to other
countries
• Exports benefit consumers in other countries
(p55)
Measuring Trade Relations
• Countries are concerned about balancing
income with expenses
• When a country has an unfavorable balance of
trade it owes money to others
• Foreign debt is the amount a country owes to
other countries
• Balance of trade – the difference between a
country’s total exports and total imports
• If a country exports (sells) more than it imports
(buys), it has a trade surplus
Measuring Trade Relations
• If a country imports more than it exports, it has a
trade deficit
• In addition to exporting and importing, other
forms of exchange take place among nations
• Money goes from one country to another
through investments and tourism
• Balance of payments – the difference between
the amount of money that comes in a country
and the amount that goes out of it
International Currency
• One challenge faced by businesses involved in
international trade is the various currencies
used around the world
• Countries have their own banking systems and
money
–
–
–
–
–
Russia: ruble
European Union: euro
Brazil: real
India: rupee
Saudi Arabia: riyal
International Currency
• Exchange rate – the value of currency in one
country compared with the value in another
• The values of currencies may change day to day
• Factors affecting exchange rates (p58-59):
1. Country’s balance of payments
2. Economic conditions
3. Political stability