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Economics for Leaders

Economics for Leaders. Lesson 10: International Markets. Countries don’t trade . People Do !. Voluntary Trade Creates Wealth - ALWAYS. International trade. National trade. Regional trade. Local trade. Balance of Payments. Current Account. Capital account. Goods & Services.

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Economics for Leaders

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  1. Economics for Leaders Lesson 10: International Markets

  2. Countries don’t trade People Do !

  3. Voluntary Trade Creates Wealth - ALWAYS International trade National trade Regional trade Local trade

  4. Balance of Payments Current Account Capital account Goods & Services Financial flows

  5. Please use the slides before this one in your presentation. • The slides following this one are provided as options.

  6. Fundamentally the same decision

  7. ERP-5: Understanding based on knowledge and evidence imparts value to opinions. Opinions matter and are of equal value at the ballot box. But on matters of rational deliberation the value of an opinion is determined by the knowledge and evidence on which it is based. Statements of opinion should initiate the quest for economic understanding, not end it. Economic Reasoning Principle #5: Understanding based on knowledge and evidence imparts value to opinions.

  8. Opening Markets Is Creating Wealth

  9. Who should produce what? • The Law of Comparative Advantage • Through specialization and exchange, both parties can gain from lower costs and greater output – even if one party does both things better. What is your lowest opportunity cost alternative?

  10. Comparative AdvantageProducing a Meal Barbie Ken Cooking 10 min 40 min 30 min Cleaning 20 min 30 min 70 min Totals

  11. Opportunity Costs Barbie Ken 1/2 cleaning 4/3 cleaning Cooking Cleaning 2/1 cooking 3/4 cooking

  12. What Will Ken & Barbie Do? • Working Independently • Barbie Produces a Meal in 30 Minutes • Ken Produces a Meal in 70 Minutes • Barbie Has An Absolute Advantage • Would Barbie Produce Two Meals? • With Trade/Cooperation • Barbie Spends 20 Minutes Cooking • Ken Spends 60 Minutes Cleaning • They Both Gain!

  13. RememberNations Are Not Different • Goods are Produced at Least Cost When People Specialize According to the Principle of Comparative Advantage • Lesson - Don’t Try to Do Everything; It is Not Efficient • Trade Between Countries Creates Wealth • Examples • Ken and Barbie Have Time for Other Activities

  14. Zeke and Zac • Who Should: • Drive the truck ? • Load the garbage? What if – Zac doesn’t have a drivers license?

  15. Banana size regulations

  16. Mexican Truck Now Allowed on US Highways

  17. NAFTA

  18. WTO (formerly GATT)

  19. European Monetary Union

  20. Trade Balance Imports Exports

  21. Pierre Sells (Exports) Bread . . . Then What?

  22. What Can Pierre Do with $$US? Take his Cheri to his favorite bistro at the Eiffel Tower? Mais NON! Buy U.S goods & services OR U.S. assets ? Oui! Oui!

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