Georgia Performance Standards s4

GEORGIA PERFORMANCE STANDARDS International Domain [Type the author name] INTERNATIONAL ECONOMICS Fundamental Economic Concepts *Explain how specialization and voluntary exchange between buyers and sellers increase the satisfaction of both parties. *Provide examples of how individuals and businesses specialize

Division of Labor refers to the practice of dividing the work to make something into separate tasks. Workers become specialized in different tasks. We earn a living by doing tasks, taking our wages to purchase goods and services from other workers. Division of Labor and Specialization is the basis for an economy to exist. 3 benefits are doing it better, no time required to switch tasks, create more effective ways to do the task.

*Explain that both parties gain as a result of voluntary, non-fraudulent exchange.

We don’t make all of our electronic devices, countries do not make all of the goods and services they need. Specialization is the basis of trade and interdependence among individuals, businesses, cities, regions and countries. Wisconsin = dairy Florida = oranges.

INTERNATIONAL ECONOMICS Explain why individuals, businesses and governments trade goods and services. Define and distinguish between absolute advantage and comparative advantage

Comparative Advantage – the ability to produce a good or service at a lower opportunity cost than some other producer (the economic basis for specialization and trade)

Absolute Advantage –. the ability to produce more units of a good or service than some other producer, using the same quantity of resources.

Explain that most trade takes place because of comparative advantage in the production of a good or service COMPARATIVE ADVANTAGE – every country should produce and trade the good in which it has a comparative advantage. The good or service in which the opportunity cost is lowest. Staying with comparative advantage yields the biggest gains in trade

BENEFITS OF TRADE – international trade equals increased competition, increased variety of goods available to consumers, spreads new technology and production methods, helps low-income countries.

Explain the difference between balance of trade and balance of payments Balance of Trade – a comparison of imports and exports of goods and services.

Balance of Payments – the record of all transactions in trading good and services between countries and is expressed in monetary terms (dollars)

of 4 Explain why countries sometimes erect trade barriers and sometimes advocate free trade a. define trade barriers as tariffs, quotas, embargoes, standards and subsidies Tariff – a tax on imported goods and services.

Quotas – a limit on the quantity of a product that may be imported or exported.

Embargoes – to impose certain conditions before granting consent to import a good or service.

Standards – expectations of minimal levels of quality that must be met or extra safety standards.

Subsidies – financial assistance from government to an enterprise or business, often considered to be beneficial to the public.

Identify costs and benefits of trade barriers over time Designed to prevent imports and protect domestic industries and producers, protectionism is an attempt to protect a nation’s economy, trade barriers may save jobs in one area and at the same time destroy jobs in another area.

List specific examples of trade barriers Tariffs, import quotas, non-tariff barriers like additional administrative requirements, regulations or unnecessary procedures.

List specific examples of trading blocks such as the EU, NAFTA, ASEAN EU – European Union NAFTA – North American Free Trade Agreement [US/Canada/Mexico ASEAN – Association of Southeast Nations MERCOSUR – Common Market of the South [Latin America]

Other players on the world stage: BRIC – Brazil, Russia, India, China GATT – General Agreement of Tariffs and Trade WTO – World Trade Organization IMF – International Monetary Fund World Bank Evaluate arguments for and against free trade. The arguments most often heard AGAINST free trade… Keep jobs in America, keep our money in our country, national security, other nations treat their workers unfairly, other nations dump cheap stuff in our country, other countries keep our products from being sold in their country.

The argument FOR free trade…. Lower prices for goods, more variety in goods and services, higher standard of living because of increased income as a result of lower prices.

of 4 *Explain how changes in exchange rates can impact the purchasing power of individuals in the United States and in other countries.

Exchange rate is the amount of one country’s currency that is equal to one unit of another country’s currency (Dollar vs. yen). Exchange rates are determined by supply and demand. All countries typically want to be paid in their country’s currency.

Define exchange rate as the price of one nation’s currency in terms of another nation’s currency Exchange Rate – the price of one nation’s currency in terms of another nation’s currency.

Locate information on exchange rates – process skill

Interpret exchange rate tables – process skill

Explain why, when exchange rates change, some groups benefit and others lose.

When demand for a country’s currency rises faster than the supply of its currency, the value of the currency will rise.