May 1, 2012 Introduction to
Trade
Goal 1: Determine how and why nations trade with
each other?
Why does the U.S trade with other countries??
-To have access to goods we do not produce
-Some countries are better at making certain goods
-Some countries produce cheaper goods
-make alliances
-makes supply global
Economic Interdependence- is a situation in which
producers in one nation depend on other nations to
provide goods and services they do not produce.
Example: Coffee
Absolute Advantage- is the ability of one trading nation
to make a product more efficiently than another trading
nation.
Example:
-Australia produces 5000 tons of iron ore and 1000 tons
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-Australia produces 5000 tons of iron ore and 1000 tons
of steel every week
-China produces 2700 tons of iron ore and 900 tons of
steel every week
*Australia has the absolute advantage in both areas
Comparative Advantage- is a trading nation's ability to
produce something at a lower opportunity cost than that
of another trading nation.
Example:
-Australia's opportunity cost for one ton of steel is 5 tons
of iron ore
-China's opportunity cost for one ton of steel is three
tons of iron ore
*China has a comparative advantage in the production of
steel because they have less of an opportunity cost than
Australia
Goal 2: Determine how the United States is involved in
international trade?
Exports- goods and services produced in a nation and
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Exports- goods and services produced in a nation and
sold to buyers in another nation
Imports- a good or service purchased from another
country or nation.
U.S. Imports and Exports 2007
Where does the U.S. Export to and Import From
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Who Exports the Most?
Trade Deficit- Occurs when a nation imports more than it
exports.
-In 2007 the U.S imported $816 Billion more goods than
it exported
-The U.S has large trade deficits with Japan and China
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-The U.S has large trade deficits with Japan and China
Trade Surplus-Occurs when a nation exports more than it
imports.
-In 2007 the U.S exported (sold) more services
(transportation, banking, legal) than it imported from
other countries by $107 billion
Exit question: List two reasons why countries need to
trade with each other?
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