6.00 Understand economics trends and
communication.
Define the following terms: imports, exports,
international trade, absolute advantage, and
comparative advantage.
 Imports – Goods brought into the country
 Exports – Goods sent to other countries
 International Trade – Good exchanged
between countries

Absolute Advantage - The general ability to
produce more goods or services using fewer
resources. A person or country has an
absolute advantage in production largely due
to superior technology or greater technical
efficiency.
◦ An absolute advantage exists if a person, country,
business, government, or some other entity can
produce more output using fewer inputs than a
comparable entity.
http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=absolute+advantage
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Comparative Advantage - The ability to
produce one good at a relatively lower
opportunity cost than other goods, especially
compared to production in another country.
◦ While a person, country, business, government, or
other producing entity may or may not have an
absolute advantage in production, every producer
has a comparative advantage in the production of
something.
http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=comparative+advantage

Describe reasons that international trade
takes place.
◦ Comparative advantage
◦ Lack of raw materials or production capabilities
◦ Desire to build positive relations

List gains from international trade.
◦ New products that otherwise wouldn’t be available
◦ One nation exports, another nation imports; both
should benefit

Identify ways in which the U.S. economy is
affected by international trade.
◦ Positive – gain new products or the raw materials to
build products for other countries (Japan)
◦ Negative – can lower prices on domestic goods or if
we import too much we go into debt

Describe types of trade barriers.
◦ Tariffs, Quotas, Subsidies of domestic industries
http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=international+trade

Explain techniques used by governments to
improve international trade relations.
◦
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International labor standards
Environmental standards
Lowering trade barriers to developing countries
World Trade Organization (WTO)
Define the terms exchange rate, exchange-rate
quotation, free-floating currency, pegged
currency, foreign-exchange market,
strong/weak dollar, and arbitrage.
◦ Exchange rate - The price of the currency of one
country stated in terms of the currency of another
country, that is, the rate of exchange of one
currency for another. In general, exchange rates
reflect the overall health, vitality, and productivity
of a nation's economy.
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=exchange+rate

Exchange-rate quotation - exchange rate quotation is given by
stating the number of units of a price currency that can be
bought in terms of 1 unit currency. For example, in a quotation
that says the EUR-USD exchange rate is 1.2 USD per EUR, the
price currency is USD and the unit currency is EUR.
http://www.forex-trading-i.com/exchange-rate.html


Free-floating currency - also termed a Flexible Exchange Rate,
is an exchange rate determined through the unrestricted
interaction of supply and demand in the foreign exchange
market
Pegged currency - its value is maintained by the government in
question at a fixed rate relative to the other currency. In 1983
the Hong Kong dollar was linked to the United States dollar.
http://www.forex-trading-i.com/exchange-rate.html

Foreign-exchange market - A market that trades the currencies
of different countries. The foreign exchange market is actually a
series of different markets, each exchanging the currency of one
nation for that of another nation.


Strong/weak dollar
◦ Strong means that the dollar is worth more of the
foreign currency
◦ Weak means it is worth less
Arbitrage - the activity of exploiting imbalances
between two or more markets. Foreign money
exchangers operate their entire businesses on
this principle. They find tourists who need the
convenience of a quick cash exchange. Tourists
exchange cash for less than the market rate
and then the money exchanger converts those
foreign funds into the local currency at a higher
rate. The difference between the two rates is
the spread or profit.
http://www.wisegeek.com/what-is-arbitrage.htm

Distinguish between direct and indirect exchange-rate
quotations.
◦ Direct - A foreign exchange rate quoted as the domestic currency
per unit of the foreign currency. In other words, it involves
quoting in fixed units of foreign currency against variable
amounts of the domestic currency.
◦ Indirect - A foreign exchange rate quoted as the foreign currency
per unit of the domestic currency. In an indirect quote, the foreign
currency is a variable amount and the domestic currency is fixed
at one unit.
http://www.investopedia.com/terms/i/indirectquote.asp#ixzz1h5ca0F5J
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Interpret exchange rates – how much foreign currency a
dollar will buy
Identify factors that increase demand for currencies.
◦ Strong economy for the countries with that currency
◦ Weak economy for countries wanting that currency
Explain factors that cause a currency to lose value relative
to other currencies.
◦ Balance of trade and economic conditions of each country

Discuss how economic factors affect exchange rates.
◦ Strong economies strengthen the currency and vice-versa

Explain how market psychology can affect
exchange rates.
◦ Money is worth as much as people think it is

Describe how political conditions can influence
exchange rates.
◦ Politics is believed to directly affect the economy

Distinguish between free-floating and pegged
currency.
◦ Free floating changes with economic conditions, pegged
is connected to the value of a specific currency

Describe factors that influence free-floating
currency.
◦ Economy, politics, balance of trade, etc.

Identify institutions that utilize the foreign exchange
market.
◦ Governments, companies that trade goods in foreign markets
(exporters), investors, speculators, tourists and banks.

Discuss types of financial instruments used in foreign
exchange markets.
◦ Currencies

Explain the advantages/disadvantages of a strong U.S.
dollar.
◦ (A) Can get good deals when traveling abroad, good exchange
rate on imports
◦ (D) Exported goods can see lost sales due to being too expensive

Describe the advantages/disadvantages of a weak U.S.
dollar.
◦ (A) Increased sales of exports
◦ (D) Imported goods are more expensive

Explain the risks of speculating on the price of foreign
currency.
◦ Fluctuations can be hard to predict, government policy changes
can greatly impact the exchange rates
Describe Hofstede’s dimensions of national
cultures (i.e., individualism vs. collectivism,
power distance, uncertainty avoidance,
masculinity vs. femininity).
◦ Individualism vs. Collectivism: Is the culture based
on the importance and freedom of the individual or
the good of the society (not mutually exclusive). A
society's position on this dimension is reflected in
whether people’s self-image is defined in terms of
“I” or “we.”
◦ Power distance: the degree to which the less
powerful members of a society accept and expect
that power is distributed unequally. The
fundamental issue here is how a society handles
inequalities among people.
http://geert-hofstede.com/dimensions.html
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Uncertainty avoidance: the degree to which the
members of a society feel uncomfortable with
uncertainty and ambiguity. The fundamental
issue here is how a society deals with the fact
that the future can never be known: should we
try to control the future or just let it happen?
Masculinity vs. femininity: The masculinity side of
this dimension represents a preference in society
for achievement, heroism, assertiveness and
material reward for success. Society at large is
more competitive. Its opposite, femininity, stands
for a preference for cooperation, modesty, caring
for the weak and quality of life. Society at large is
more consensus-oriented.
http://geert-hofstede.com/dimensions.html
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Explain why business subcultures shape the
behaviors of businesspeople.
◦ People adapt to what is expected of them if they wish to be
successful

Explain how language impacts knowing when and
how business will be conducted.
◦ Clarity of communication

Explain how culture influences communication.

Discuss how the interrelationship of business law and
religion impacts international business activities.
◦ What is acceptable and expected
◦ What culture is prevalent and set up the ethics of the
county?
◦ Theocracy?
◦ Understanding of different ways or must it be done only
one way?

Identify ways to overcome issues with the
crossover of business law and religion in
international business activities.
◦ Study your clients, learn about what is important
and what is acceptable and expected
◦ Carefully design ads, and even packaging to fit into
the culture

Describe how corruption impacts
international business activities.
◦ Some cultures allow those with power to exercise it
for their own benefit (bribes)
◦ Not following the norms could hinder your
business, but following the foreign norms could get
you in trouble in America

Explain how a country’s level of involvement
impacts international trade.
◦ What can the country and its citizens handle?

Discuss how culture can hamper international
trade.
◦ Cultures can clash in how they chose to interact.
What is acceptable and expected in one might be
criminal in the other.
◦ Large and small mistakes can impact the future of
commerce.

Explain how culture can impact trade partner
selection.
◦ The culture affects what the individuals will find
acceptable and pleasing
◦ Fitting into the culture will improve the odds of
doing business successfully

Describe how culture can impact negotiations
in international trade.
◦ Differing views can emphasize different parts of the
negotiation process or the items being traded

Discuss how culture can impact product
delivery in international trade.
◦ What value does the sending/receiving country
place on speedy and efficient delivery?
◦ Is rest as important as work? (Spain and the siesta)
◦ What is good enough condition?

Explain how positive/negative experiences
with a culture can update one’s beliefs.
◦ We all make judgments

Describe how culture can impact the selection
of trade goals in international trade.
◦ What is important in that culture affects what will
be important in trade