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Warm-up

Warm-up. Define the following and create two sentences with two of the key words in each: Imports Exports Surplus Deficit. International Economics. EQ: Why should we trade with other nations?. What is meant by a FAVORABLE balance of trade?. Balance of Trade is--. =.

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Warm-up

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  1. Warm-up • Define the following and create two sentences with two of the key words in each: • Imports • Exports • Surplus • Deficit

  2. International Economics EQ: Why should we trade with other nations?

  3. What is meant by a FAVORABLE balance of trade? Balance of Trade is-- = Value of the Exports Value of the imports What do we call it when -- > Value of the exports Value of the imports Trade Surplus < What do we call it when -- Value of the exports Value of the imports THE U.S.A!! Trade Deficit

  4. What is the U.S. trade deficit?

  5. Analyze…. • What can we say about the green nations? • How about the red?

  6. What is the relationship to the trade and GDP? Y = C + I + G + NX

  7. Where is your shirt from?

  8. Japanese Shipping Company

  9. So, where do most U.S. imports come from?

  10. Korean Shipping Company

  11. It is fairly obvious, which country is our #1 trading partner? CANADA

  12. Top 15 International Trading Partners 1. Canada 2. China 3. Mexico 4. Japan 5. Germany 6. United Kingdom 7. South Korea 8. France 9. Taiwan10. Netherlands

  13. Top 5 Countries Receiving U.S. Exports • Canada • 2. Mexico • 3. Japan • 4. China • 5. United Kingdom Top 5 Countries Supplying U.S. Imports 1. Canada 2. China 3. Mexico 4. Japan 5. Germany

  14. What is the U.S. # 1 import?

  15. What does the U.S. export? • High tech items: • industrial lathes • computer chips • fighter jets • health care products

  16. With a partner, why do nations trade? Comparative Advantage!!!

  17. I am going to prove that specialization works. I am going to name a state and you tell me what that state specializes in: Idaho Potatoes Florida Oranges Oil or cattle Texas Michigan Automobiles Nevada Any illegal activity that you can think of

  18. Absolute and Comparative Advantage Larnetta types 120 w.p.m. with 0 errors Marquis types 60 w.p.m. with 0 errors Who should do the typing? Larnetta. Why? Larnetta can type ABSOLUTELY faster than Marquis can. What type of advantage does Larnetta have over Marquis? Absolute Advantage

  19. Absolute Advantage-- One entity can produce something either faster than or greater than another entity.

  20. I forgot to tell you--Larnetta is a lawyer. A lawyer earns $60 an hour. A secretary earns $6 an hour. A 600-word document has to be typed, how long does it take each person to type this document? How long does it take L to type this document? How long does it take M to type this document?

  21. Who should do the typing? Marquis Comparative Advantage One entity can produce something at a LOWER MARGINAL OPPORTUNITY PRODUCTION COST than another entity What is Larnetta’s opportunity cost compared to how much a secretary makes?

  22. Take absolute advantage and KICK IT OUT THE DOOR. The more important of the two is-- Comparative Advantage

  23. Remember this? Production Possibilities Frontier AKA “The PP Curve” what does it show us? school work

  24. Who has an absolute advantage in TVs? Fertilizer? TV TV 80 Japan U.S. 50 20 50 Fertilizer Fertilizer

  25. Who has the comparative advantage in the production of TV’s? Fertilizer? What is Japan’s opportunity cost of 1 ton fertilizer? What is Japan’s opportunity cost of 1 TV? What is the U.S.’s cost of 1 ton fertilizer? What is the U.S.’s opportunity cost of 1 TV? What good should each country specialize in?

  26. Review What country has the absolute advantage in car production? Absolute advantage in shoe production? What country has the comparative advantage in cars? Comparative advantage in shoes? What good should each country specialize in?

  27. Boeing 787

  28. Boeing 787, a Global Project List three possible benefits Boeing receives as a result of partnering with companies in other countries. 1. 2. 3. List three common characteristics all of the countries making parts for the 787 share. 1. 2. 3. List three possible costs of Boeing’s decision to purchase 787 parts from companies in other countries. 1. 2. 3. How is the production of the Boeing 787 a good example of explaining specialization and comparative advantage?

  29. What do you think? • If the U.S. sells computers to Japan, in what currency does Japan purchase the computers? What could the U.S. do with the currency it receives?

  30. Exchange Rates Why do they fluctuate?

  31. Assume that the United States and France are the only two countries in the world and that exchange rates between the two countries are flexible. Assume that there is an increase in the U.S. demand for French goods. Explain how this increase in demand will affect each of the following. (i) The supply of dollars (ii) The international value of the dollar

  32. Currency doesn’t flow this way Euro French goods S u p p l y P a y dollar P P S S P1 S1 P P D1 P1 D buy D Q Q1 Q Q Q Q1 Euro Dollar Exchange Market

  33. Nominal Exchange Rates • Appreciation refers to an increase in the value of a currency as measured by the amount of foreign currency it can buy. • Depreciation refers to a decrease in the value of a currency as measured by the amount of foreign currency it can buy.

  34. How might exchange rates affect your everyday lives? • http://www.npr.org/blogs/money/2011/11/21/142500594/why-a-new-york-cheese-buyer-hangs-on-the-euros-fate • Where does Murray’s get most of its cheese? • How is Aaron Foster’s financial well-being tied into Europe? • In what currency does Aaron purchase his cheese? • How does the cheese get to the port for shipment in Europe? • Does he pay more or less from his cheese when the Euro drops in value? • Why does he not want the situation in Europe to worsen?

  35. Review • What are the three major trading? blocks/alliances we have read about? • What are two arguments for free-trade (think about NAFTA)? • What is an arguments against? • What are four barriers to trade? • Of these barriers, which one is predominantly used for political reasons?

  36. ? ? ? ? ? ?

  37. Weak or strong?

  38. Summary • What happens to net exports when the dollar gets stronger? • What happens to net exports when the dollar gets weaker? • When is it better to travel abroad – when the dollar is weak or strong relative to other currencies?

  39. China and the Dollar • http://www.econedlink.org/interactives/index.php?iid=151

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