Before Activity Think-Pair-Share –List imports & exports of the U.S.

 Importing, exporting, trade relations, and global currencies are covered in this lesson.

Trading Among Nations Domestic business is the making, buying, and selling of goods and services within a country International business refers to business activities needed for creating, shipping, and selling goods and services across national borders; also known as foreign or world trade Although the U.S. has many natural resources, a skilled labor force, and modern production facilities, American companies and consumers go beyond our borders to obtain many things

Trading Among Nations The U.S. conducts trade with more than 180 countries Consumers have come to expect goods and services from around the world What are some of the advantages and disadvantages of international trade?

Trading Among Nations Absolute vs. Comparative Advantage Absolute advantage exists when a country can produce a good or service at a lower cost than other countries This may result from an abundance of natural resources or raw materials in a country Ex) South American countries have an absolute advantage in coffee production, Saudi Arabia has an absolute advantage in oil production

Trading Among Nations Absolute vs. Comparative Advantage A country may have an absolute advantage in more than one area If so, it must decide how to maximize its economic wealth A country may be able to produce both computers and clothing better than other countries

Trading Among Nations Absolute vs. Comparative Advantage The world market for computers may be stronger than market for clothing This means it would be better for the country to produce computers but to buy clothing from other countries Comparative advantage is a situation in which a country specializes in the production of a good or service at which it is relatively more efficient

Trading Among Nations Imports – items bought from other countries Imports account for the total supply of bananas, coffee, cocoa, spices, tea, silk, and crude rubber in the U.S. Without foreign trade, many things you buy would cost more or not be available Exports – goods and services sold to other countries Exports benefit consumers in other countries (p55)

Measuring Trade Relations Countries are concerned about balancing income with expenses When a country has an unfavorable balance of trade it owes money to others Foreign debt is the amount a country owes to other countries Balance of trade – the difference between a country’s total exports and total imports If a country exports (sells) more than it imports (buys), it has a trade surplus

Measuring Trade Relations If a country imports more than it exports, it has a trade deficit In addition to exporting and importing, other forms of exchange take place among nations Money goes from one country to another through investments and tourism Balance of payments – the difference between the amount of money that comes in a country and the amount that goes out of it

International Currency One challenge faced by businesses involved in international trade is the various currencies used around the world Countries have their own banking systems and money –Russia: ruble –European Union: euro –Brazil: real –India: rupee –Saudi Arabia: riyal

International Currency Exchange rate – the value of currency in one country compared with the value in another The values of currencies may change day to day Factors affecting exchange rates (p58-59): 1.Country’s balance of payments 2.Economic conditions 3.Political stability