1. International Trade and Its Benefits

2. In 2005, about 10% of all the goods produced in the U.S. were exported, or sold to other countries. A larger amount of goods were imported, or purchased from abroad Importing goods gives Americans products they might not otherwise be able to enjoy.

3. Trade is one way that nations solve the problem of scarcity Nations trade for goods/services because they do not have them or are unable to make them cheaply. We buy bananas from Central America because we do not have the soil or climate to grow them; Commercial aircraft are sold to other countries because they do not have the factories or skilled workers.

4. Comparative Advantage is the ability of a country to produce a good at a lower opportunity cost than another country can. The U.S. could manufacture electronics but other countries can make them at a lower cost, so we buy them from other countries that make them Comparative Advantage leads nations to specialize

5. Specialization allows countries to use their scarce resources to produce items better than any other country When a country produces more than their people can actually use, they sell the extra amount abroad. Countries can have a comparative advantage in particular resources such as Saudi Arabia (oil deposits), or the U.S. (skilled workers, advanced technology)

6. International trade does accomplish two things: 1.Creates jobs 2. Creates new markets

7. Foreign countries with a comparative advantage can sell their product more cheaply than companies making the product in their own country. As a consumer you would likely buy the cheaper product Workers who make the product domestically may lose their jobs when sales drop When this happens, government may step in to impose trade barriers to protect domestic workers and industry

8. Two most common trade barriers are tariffs and quotas A tariff is a tax on an imported good; 20% tariff means an additional 20% to the final price of a foreign good. The goal is to make the price of an imported good higher than the price of the same good produced domestically As a result, consumers would be more likely to buy the domestic product.

9. However, when people want the foreign product so badly that higher prices have little effect on demand, countries have to set quotas. Quotas set limits on the amount of foreign goods allowed into a country (imported) During the 1980’s, Japanese cars were so popular that American autoworker jobs were threatened. President Ronald Reagan placed quotas on Japanese- made automobiles

10. In general, trade barriers cost more than the benefits gained Most countries try to achieve free trade with other nations Most countries try to convince other countries to not pass laws that block or limit trade A trend the world has been seeing lately is the formation of free trade zones among key trading partners

11. The European Union (EU) is an organization of independent European nations, which formed a huge market Goods, services, and even workers flow freely among these nations because the EU has no trade barriers Since 2002, these countries have been linked even closer due to the adoption of a common currency, the euro.

12. In the 1990’s, the U.S., Canada, and Mexico signed their own free trade agreement: North American Free Trade Agreement (NAFTA). Elimination of all trade barriers among these countries. Since its implementation, trade among the three countries has grown twice as fast as the separate economies themselves have grown

13. Opponents of NAFTA claimed that American workers would lose their jobs because U.S. plants would move to Mexico (cheaper labor, less regulation, environmental and workers’ rights laws ignored) Supporters of NAFTA argue that increased trade would stimulate growth and put more low cost products on the market.

14. Different nations use different currencies as a medium of exchange: U.S. = dollar Mexico = peso Japan = yen To buy something in Mexico, an American would have to exchange your dollars for pesos by using the exchange rate, or the price of one nation’s currency in terms of another country’s currency

15. Most nation’s use an adjustable exchange rate system which allows supply and demand to set the price of various currencies; currency prices change each day Exchange rates have an important effect on a nation’s balance of trade. Balance of Trade is the difference between the value of a nations exports and its imports.

16. If a nation’s currency depreciates, or becomes weak, the nation will likely export more goods because its products will become cheaper for other nations to buy. If a nation’s currency appreciates, or becomes stronger, exports will decline

17. When a countries value of exports exceeds the value of imports, the country has a positive balance of trade or trade surplus. A country is selling more than it is actually buying When a countries value of imports exceeds the value of exports, the country has a negative balance of trade or trade deficit. A country is buying more than it is actually selling

18. Do you know their meanings? Scarcity Export Tariff Comparative advantage Exchange rate Balance of tradeFree trade Trade barriers Mandatory spending Fiscal year Appropriations bill Intergovernmental Revenue Property tax Automatic stabilizer Surplus Revenue Social security Debt Quota Entitlement program Excise tax Income tax 14 th amendment Progressive tax Balanced budget

19. 1. The economy expands 2. Unemployment rises 3. Prices are inflated 4. The economy suffers a recession

20. 1. The Federal Deposit Insurance Corporation 2. The Bank of the District of Columbia 3. The Federal Reserve 4. The 2 nd Bank of the US

21. 1. What is a revenue? 2. List and explain 3 major types of U.S. taxes. 3. How did the Stamp Act of 1765 and the Tea Act of 1773 lead to the American Revolution? 4. What was granted by the 16 th amendment? 5. What are intergovernmental revenues?

22. 1. Minimal government interference 2. Minimal legal ground rules 3. Minimal private ownership 4. Minimal competition between businesses

23. 1. Natural resources 2. Labor 3. Capital 4. entrepreneurs

24. 1. Estate taxes 2. Excise tax 3. Income tax 4. Payroll tax

25. 1. The economy is booming and spending needs to decrease 2. The FED is encouraging the national government to borrow money from private banks 3. The FED is attempting to loosen the money supply to encourage more borrowing by individuals 4. Businesses are experiencing record losses in sales

26. 1. Money is more easily accessible with CD’s 2. Savings accounts do not accumulate interest 3. A person receives greater tax benefits with CD’s 4. CD’s accumulate higher interest compared to savings accounts

27. Labor Unions

28. Trade Unions Industrial Unions Right to work law Closed shop Union shop Strikes Injunction National Labor Relations Board Mediation Arbitration boycott

29. Labor Unions are groups of workers who band together to have a better chance to obtain higher pay, benefits and better working conditions Out of the 151 million in the civilian labor force, only 14% of American workers belong to a union. That number has been falling since the 1980’s as we have transformed our economy from manufacturing to a service based economy.

30. Development 1800s Poor working conditions Workers fired for no reason Workers blacklisted Knights of Labor 1st major union founded in 1869 Organized all laborers - men, women, African- Americans Terrence V. Powderly 1886 peak of membership at 700,000 Ended in 1900

31. American Federation of Labor (AFL) Organized in 1886 Denied unskilled workers, women, African Americans & immigrants Samuel Gompers Fought for higher wages, shorter hours & benefits for disabled By 1900 membership reached 500,000 Samuel Gompers

32. There are two types of unions: 1. Trade unions – workers who perform the same skills 2. Industrial unions – bring workers together who belong to the same industry Organized labor has a three level hierarchy: local unions national unions federations

33. Amer. Federation of Federal Employees United American Nurses Airline Pilots Assoc. Amer. Federation of Teachers American Postal Workers Union

34. Local unions are made up of workers in a factory, company or geographic area. Usually identified with #s Negotiates a contract with a company and monitors the contract terms Represents the National unions agenda, while at the same time representing the desires of their constituents

35. National unions are the individual craft or industrial unions that represent local unions nationwide Help employees set up local unions and negotiate contracts In certain industries, the national union negotiates the contracts for the entire industry

36. At the Federation level is the AFL-CIO Represents 13 million workers nationwide From 1955-2005, represented virtually all unionized workers in the U.S.

37. Closed Shop – Companies hire only union members Union Shop – Workers must join the union after a specified time Agency Shop – Not required to join a union, but must pay dues Open Shop – Companies may hire workers regardless of membership Modified Union Shop – Workers given an option to join a union after hiring

38. In the past, some labor unions supported closed shops, when a worker would have to first belong to a union to be hired by a company. This was banned by the Taft-Hartley Act 1947 Stopped the practice of closed shops

39. A common arrangement today is the union shop, which allows companies to hire anyone as long as they join the union shortly after they begin working One part of the Taft-Hartley Act banned this practice as well. 22 states have passed right-to-work laws, which prevent mandatory union membership required by union shops

40. What we see in the South are modified union shops, in which workers do not have to join a union, but if they do join have to remain a member for the duration of their employment. A majority of workers must vote in favor of a union before one can be formed. The National Labor Relations Board makes sure union votes are carried out honestly

41. Process where union leaders & employers discuss employment terms Once workers choose to be represented by a union, the union is responsible for carrying out collective bargaining. Union and company representatives meet to discuss conditions of employment such as: 1. Wages 2. Work hours 3. Working conditions 4. Grievance procedures 5. Benefits 6. Work rules and responsibilities

42. Compromise is the issue 3 steps Negotiation – Labor & management meet to discuss contract issues Mediation – A neutral 3rd party hears both sides Federal Mediation & Conciliation Service provides a mediator Arbitration – 3rd party makes a final decision for a compromise. Has the power of a judge and both sides agree to accept the arbitrators decision.

43. 1. Traditional Economies 2. Command Economies 3. Market Economies 4. Laser Taser Watches

44. Worker/Union Strikes – workers refuse to work Picketing – used to discourage other workers from working Boycott – Refuse to purchase goods or services from the company Scab – Worker willing to work on company terms

45. Business/Management Lockout - in which the company blocks workers from entering the workplace until they accept their contract terms. Blacklist – A list of people who are denied employment Businesses hope the loss in income will convince workers to accept the companies position. Can ask the courts to issue an injunction, a legal order from the court preventing some activity (strike) Ex. 1995 MLB season

46. In severe or extreme labor-management dispute, government may get involved. Can seize operations of an industry until conflict is settled. Ex. 1946 U.S. seized the coal industry because of the countries need for this energy source. Operation of the mines continued, until labor and management came to an amicable agreement

47. Strike Picketing ViolenceScabs/Strikebreakers

48. 1869 – Knights of Labor founded 1882 – First Labor Day parade 1886 – AFL founded 1892 – Homestead Strike 1911 – Triangle Shirtwaist factory fire 1912 – Bread and Roses strike; Dept. Labor founded 1914 – Ludlow Massacre 1920 – Women get right to vote in US 1946 – Largest strike wave in US history 1947 – Taft-Hartley Act 1955 – AFL and CIO merge 1970 – Occupational Safety and Health Act passed (OSHA) 1981 – President Reagan breaks air traffic controllers strike 2013 – Union membership hits 97 year low (14.3 million union members, 11.3% of population)

49. 1. Complimentary 2. Mr. Freeze 3. Inelastic 4. Elastic

50. Right to Work States Prevents unions from forcing workers to join Movement of Human Capital Rust belt – the North Sun belt – the South Factories & businesses moved from the rustbelt to the sunbelt Weather was better Cheaper labor No existing unions White collar vs. Blue collar jobs White Collar = upper management Lot of news on white collar crime in big business. Example: Enron, Merrill LynchMerrill Lynch Blue Collar = working class, usually doing manual labor

51. Blue Collar Workers Right to Work States in Blue

53. 1. Rust Belt 2. Sun Belt 3. White Collar 4. Blue Collar