Trade Basics
What is comparative advantage?
Products that a country can produce more efficiently than anything else.
What is free trade and how do consumers benefit from free trade?
Free trade is the removal of trade barriers and means consumers pay lower prices for goods.
What is a developed country?
A country with a strong economy, and a high standard of living.
What is productivity?
Is the amount of goods and services produced given the amount of resources used.
What is trade?
The exchange of goods and services.
What is the difference between domestic and international trade?
Domestic trade occurs within an individual country. International trade occurs between countries.
Which category of countries benefit the least from trade?
Lower income countries
What does having high purchasing power enable people to do?
Buy more things they need and want.
What is Gross Domestic Product?
It measures a country's economy--the total value of all the goods and services produced in a country within a year.
What are three types of trade barriers (explain each)?
Tariffs -- a tax on imports or exports.
Quotas -- sets a limit on the number of units of a good that can be imported.
Embargos -- a ban on ALL trade with a particular country.
Why did many of the countries of the European Union decide to adopt the same currency?
It made trade easier by eliminating the need to exchange currencies.
For what reasons do governments enact trade barriers?
To try and protect domestic products from competition from lower-priced imports.
If a country invests to improve its universities, how is it trying to boost development?
By investing in human capital.
How does technology increase productivity?
Technology can help workers do tasks more quickly and efficiently, which increases productivity.
What is GDP?
Gross domestic product is the total value of all goods and services produced in a country in a year.
How does resource distribution make trade necessary?
Resources are distributed unevenly, so countries have to trade to get things they need or want but do not have.
What is development
Economic growth or increase in living standards
Why do higher wages indicate a higher level of development for a country?
Higher wages indicate a higher standard of living.
The federal government passed the Smoot-Hawley Tariff Act in 1930 that was originally intended to protect workers. However, many countries raised their tariffs as well ending in a tariff war. What did countries do to resolve this issue?
What was the GATT--the General Agreement on Tariffs and Trade which reduced tariffs and other trade barriers.
When does geographic location give a country or region a trade advantage and disadvantage?
Advantage -- A region is located close to an ocean which gives that region a shipping of goods advantage.
Disadvantage -- A manufacturing plant is located far away a market has to include transportation costs to its products, making them higher in price.
What are two ways in which geography affects the location of economic activities?
(Any Two) The availability of resources, access to a port, and distance to major markets are all geographic factors that affect economic activity.
Suppose a free trade agreement allows a foreign country to sell cheaper cars in the United States. What is a positive and negative effect?
Positive: Consumers can buy cheaper products.
Negative: Fewer U.S. cars are purchased, so U.S. workers lose jobs.
How can a society increase its level of development?
A country that specializes in what it makes best and then trade for other goods. Also, invest in the country's human capital (the skills, knowledge and experience of individuals or populations).
How does specialization encourage international trade and make countries interdependent?
Countries specialize in what they produce best and import what they cannot produce efficiently. Since all countries must import some goods, they all become dependent on one another.
How can a country increase its economic development (name two ways) ?
Find more resources to use in creating products.
Invest in capital goods like factories and equipment
Invest in human capital by increasing workers skills and knowledge by investing in education of its workforce.