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Chapter 15
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  • 1. Chapter 15 International Trade and Economic Development
  • 2. International Trade
    • Exports – goods produced in a country and sold to residents in a foreign country
    • US Export Partners: Canada 23.4%, Mexico 13.3%, Japan 6.1%, China 4.6%, UK 4.3%
    • Imports – goods produced in foreign countries and purchased in another country
  • 3. Where our imports come from…
  • 4. Trade Balance
    • Balance of Trade – the difference between the value of a countries exports and the value of their imports
    • Balance of Trade = value of exports – value of imports
  • 5. International Trade Lingo
    • Absolute Advantage – the situation in which a country can produce more of a good than another country with the same quantity of resources
    • Specialize – To do only one thing. For example, when a country specializes in the production of a good, it produces only that good.
    • Comparative Advantage – The situation in which a country can produce a good at a lower cost than another country.
  • 6. Outsourcing
    • Outsourcing – the term used to describe work done for a company by another company or by people other than the original company’s employees
      • Cost – jobs are lost
      • Benefits – cheaper consumer products
      • The costs are easier to see than the benefits
  • 7. Tariffs and Quotas
    • Tariff – a tax on imports
    • Quota – legal limit on the amount of a good that may be imported
      • Tariffs and quotas raise the price of imported goods to the U.S. consumer
  • 8. Economic Development
    • Developed Country – a country with a relatively high GDP
    • Less – Developed Country – a country with a relatively low GDP
  • 9. Problems and Needs of the Developing World
    • Obstacles to Economic Development:
      • Rapid population growth
      • Low savings rate – people are to poor to save money
      • Cultural differences may inhibit change
      • Political instability
    • Factors that aid growth and development:
      • Free trade
      • Foreign investment
      • Low government intervention in wage a price controls