Economics for Leaders Voluntary trade… creates wealth Any choice creates an… opportunity cost Both individuals and firms compare marginal benefit to… marginal.

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Presentation transcript:

Economics for Leaders Voluntary trade… creates wealth Any choice creates an… opportunity cost Both individuals and firms compare marginal benefit to… marginal cost to maximize in their decisions Supply & demand determine… prices in a market economy An increase in productivity lowers… the cost of production and output prices An EFL Review

Economics for Leaders Lesson 10: International Markets

Economics for Leaders

International Trade Is expanding international trade a good thing or a bad thing? It Depends! Opportunity Cost

Economics for Leaders

Opening Markets Creates Wealth

Economics for Leaders Voluntary trade creates wealth through: Exchange of goods with differing values/opportunity costs Specialization and increased productivity

Economics for Leaders What do we specialize in? Lowest opportunity cost production Comparative Advantage

Economics for Leaders Is your lowest opportunity cost production the same as Do what you do best?

Economics for Leaders A+ C- ??? Lowest Opportunity Cost Production?

Economics for Leaders People Trade Nations set trade polices Who Trades?

Economics for Leaders Trade Policy Barriers ( limits ) to Trade Tariffs (tax on goods) Quotas (limit on goods)

Economics for Leaders NAFTA Evidence:

Economics for Leaders

WTO (formerly GATT)

Economics for Leaders

Canada Mexico China Japan German y UK Korea France Top U.S. Trade Partners Total Trade: Exports Plus Imports Rank by Exports ( US $--billions)

Economics for Leaders

Economics for Leaders

Economics for Leaders

Economics for Leaders

Economics for Leaders Trade Balance Imports Exports

Economics for Leaders U. S. Goods Trade Balance With Other Nations, 2008 ($US - billions) CountryExportsImportsTrade Balance Canada Mexico China Japan Germany EU Taiwan Korea France

Economics for Leaders Balance of Payments Current Account Goods & Services Capital account Financial flows

Economics for Leaders Pierre Sells (Exports) Bread... Then What?

Economics for Leaders What Can Pierre Do with $$US ? Take his Cheri to his favorite bistro at the Eiffel Tower? Mais NON! Buy U.S goods & services OR U.S. assets ? Oui!

Economics for Leaders Indicators of Hourly Labor Costs For Production Workers in Manufacturing, Selected Countries, 2004Labor Costs (in $ U.S.)(% of U.S. Labor Cost) United States Canada France Germany Italy Japan United Kingdom Hong Kong Korea Mexico Singapore Sri Lanka

Economics for Leaders

The “Big Ideas” from Lesson 10: 1.International trade is similar to domestic trade – people choose to trade. 2.Trade allows people to specialize in their lowest opportunity cost production. 3.Comparative advantage encourages specialization and trade, both domestically and internationally. 4.Specialization, based on comparative advantage, increases productivity and economic growth.

Economics for Leaders The “Big Ideas” from Lesson 10: 5.Exchange rates reflect the supply and demand for nations’ currencies. Changes in currency values affect the flow of trade. 6.Trade in goods, services, capital, and financial assets always balances.