Global Economics
By Ms. Lane
Why have you traded things you
owned?
• Think about why you have traded clothes,
lunches, toys, jewelry, hats, CDs, baseball
cards, etc. with friends and/or relatives over
the years.
• Why have you made trades?
I can describe the effects of international trade
on people and nations.
Why do nations trade with each
other?
• Nations trade because:
– One nation cannot produce everything that the people want
– Trading makes the standard of living better for the people
– Trading helps nations specialize and use resources efficiently
• This is an economic issue as it relates to resource availability
– Each country has different amounts of resources available
– Resources are called factors of production
– The factors of production that are most important for analyzing global economics are:
•
•
•
•
Land (natural resources)
Labor
Human capital
Physical capital
• Compare the USA and your two assigned countries to determine:
– What they should specialize in based on their factors of production
– How they may use resources efficiently
I can describe the effects of international trade on people and nations.
Using resources efficiently
• Use the CIA World Factbook to collect data about the
two countries that have been assigned to you.
• Read pages 441-443 to help you compare and rank the
countries.
• What should each country specialize in?
• Specialization-the concentration of productive efforts
of individuals and firms on a limited number of
activities
– Making a few goods well (specializing) is important
because:
• Resources are used efficiently
• Trading goods help countries get goods they want
I can compare the similarities and differences between economic systems.
Countries have advantages
• Absolute advantage-the ability to produce more
of a given product using a given amount of
resources
– Examples of Absolute Advantage
• USA: corn, wheat
• Costa Rica: coffee
• Venezuela: oil
• Give an example of an absolute advantage you
have over others.
• Why does absolute advantage exist?
Comparative Advantage
• A comparative advantage is the ability to produce a product
most efficiently given all the other products that could be
produced.
• Give an example of a comparative advantage you have over
a friend or relative.
– Example of Comparative Advantage
For every computer China produces, they cannot make 5 smart
phones. Sweden cannot make 3 smart phones for every
computer they manufacture. Which country should produce
computers rather than smart phones? Why?
I can illustrate
comparative
advantage and its
affect on trade.
Comparative Advantage Practice
• For every microwave oven Korea produces, they
cannot make 4 coffee makers. Japan cannot make 2
coffee makers for every microwave oven they
manufacture. Which country should produce
microwave ovens rather than coffee makers? Why?
• What should each country specialize in?
I can illustrate
comparative
advantage and its
affect on trade.
or
?
Comparative Advantage: Korea versus
Japan
Available Resource Usage
Producing Microwave Ovens or Coffee Makers
Country Name
Global Trade Issues: Why are so many
goods made in China?
• Watch the video:
The dark side of shiny Apple products
• http://www.cbsnews.com/8301-3445_16257367950/the-dark-side-of-shiny-apple-products/
• Analyze the positive & negative effects of trade with
China
• Why are so many goods made in China?
• What can we do to make the situation better?
I can evaluate the costs and benefits of the
different economic systems.
Global Trade Issues: Destruction of
the Environment
• http://www.youtube.com/watch?v=hzz6TWN
RUAc
• http://www.rainforestinfo.org.au/background
/causes.htm
• What are the costs of making goods overseas?
• What are the benefits of making goods
overseas?
• How do property rights effect the destruction
of
the
environment?
I can evaluate the costs and benefits of the different economic systems.
I can relate economic connections and differing costs of production to trading
patterns.
Global Trade Issues: Copyrights &
Patents
• Watch & Analyze:
– Protected Content: Copyright and fair use video
The US government has provided protection for inventors by granting:
Copyrights-protection from the US government that grants a creative person the
exclusive right to publish and sell creative works.
Trademarks-a distinctive symbol, word, name or device that only the owner may use
Patents-protection for an inventor that allows this person to gain all income from the
invention for 20 years.
– What are the differences between these protections?
– Why does the US government provide these protections to inventors?
– Copyright counterfeiters video
• How did the business in the video break the law?
• Which protection was violated?
• How does this violation hurt New Balance?
I can describe how private property rights
conserve scarce resources and provide
incentives.
Section Review
• Go to Quizlet: http://quizlet.com/_cu1wu
– Complete Learn, Scatter, Test until you have
earned an “A”
• Go to Studyisland.com and take the quiz:
Global Economics
• Complete AFL numbers: 1b, 2b,3b, 4b, 6b
International Trade
Trading with the world
• There are two key trading terms:
– Imports
• A good that is brought in from another country for sale
• Why?
– Exports
• A good that is sent to another country for sale
• Why?
• Analyze International Trade
– Use the CIA World Factbook to collect data about
international trade and the two countries that were
assigned to you. Use the information to analyze
global trade patterns.
I can explain how the concepts of balance of
trade and balance of payments are used to
measure international trade.
Analyzing Trade
• Free trade means governments do not make
laws to control trading between nations
• Many countries make laws to control trade.
Why?
• To protect _____ and __________ in their
own country
I can analyze the effects of free trade, trade
agreements and protectionism.
Trade control vocabulary
Trade barrier-a means of preventing a foreign product or
service from freely entering a nation’s territory
– Import quota-limit on amount of a good that can be
imported
•
•
•
•
•
Sugar
Tobacco
Peanuts and peanut butter
Many specific dairy products (e.g. powdered milk, baby formula)
Beef
– Voluntary export restraint
• A self-imposed limitation on the number of products shipped to a
particular country
– Tariff
• A tax on imported goods
I can analyze the effects of free trade, trade
agreements and protectionism.
Protecting Business
• Scenario: Make a list of car manufacturers.
• How many of the manufacturers are
American?
• Why would the US want to impose a tariff on
foreign cars
– 3 reasons a tariff may help the economy
– How could the tariff backfire and hurt the
economy?
I can analyze the effects of free trade, trade
agreements and protectionism.
Measuring Trade
• Trade between countries is complicated
because each country has a different
currency or type of money
• Exchange Rate-the value of a foreign
country’s currency in terms of the home
country’s currency
• Exchange rate table to the right show
the amount of foreign currency one can
exchange a US dollar for on March 30,
2013. The rate changes every day.
• If the US dollar declines in value against
the British Pound and Indian Rupee,
the US dollar will buy fewer of each
currency.
• An increase in the value of a currency is
called appreciation.
• A decrease in the value of a currency is
called depreciation.
I can predict how exchange rates affect international trade.
Calculating Rate of Exchange
• Scenario 1: Your family will vacation in Mexico
this summer. How much will the hotel room
cost?
– Hotel room = 500 pesos
– 10 pesos = $1 (Exchange rate)
– 500 pesos/10 pesos per dollar = $50.00
• Scenario 2: Your family waits until September to
go to Mexico.
– The exchange rate has changed. It is now:
11 pesos = $1 (Exchange rate)
What has happened to price of the hotel room?
I can predict how exchange rates affect international trade.
Exchange Rate Problem
• You are travelling to Brazil for a
vacation. You decide to buy a
Brazilian soccer uniform as a gift for
your cousin.
• The Brazilian currency is called Real.
• The jersey costs 1500 Reals.
• The exchange rate between American
dollars and Brazilian Reals is $1 (US)
for R$30.
• How many dollars will the jersey
cost?
I can predict how exchange rates affect
international trade.
The Balance of Trade
• Countries want to balance the amount of imports
(goods brought in from another country for sale)
with the amount of exports (goods sent to other
countries for sale).
• If Imports > exports = currency value decreases
• Lower currency value
leads to higher prices
for imports…consumers then pay more for goods
I can explain how the concepts of balance of
trade and balance of payments are used to
measure international trade.
More Trade Vocabulary
• Trade surplus = Exports > Imports (for a country)
• Trade deficit = Imports > Exports (for a country)
• Balance of trade = relationship between a
nation’s imports and exports
Import
Export
Comparing Trade by Country
• Complete the table for the countries you
studied
• Which countries have a trade surplus?
• Which countries have a trade deficit?
• How can the trade situation help or hurt the
currency (money) of each country?
Unit review
• Go to Quizlet: http://quizlet.com/_cveaz
– Complete Learn, Scatter, Test until you have
earned an “A”
• Go to Studyisland.com and take the quiz:
International Trade
• Complete AFL numbers: 5b, 7b,8b, 9b