1. Warm Up Who is the current chairperson of the Fed?
What are the responsibilities of the Board of Governors? How long are their terms? How many positions become vacant every two years?
What is the FOMC and what do they do?
How many Fed banks are there?
What is another name for Tight money? Easy money?
If the Fed sells bonds, is this easy money or tight money? What if the Fed buys bonds?
What are the (3) tools of the Fed?
Does the Fed deal in Fiscal policy or Monetary policy?
CEQ: How many jobs were added to the US economy in April? Is this good or bad? What caused this?

2. Absolute and Comparative Advantage

3. The Key to Trade Specialization is the key to trade
How do you know what a country specializes in? Where do you look?
You look at its EXPORTS- the goods and services that it produces and then sells to other nations

4. The US and International Trade
Int’l trade for the US is beneficial and necessary
Goods and services are traded
IMPORTS- goods and services that one country buys from other countries
What would it be like with no imports?

5. The Basis for Trade
Absolute Advantage-when a country can produce a product more efficiently (a greater amount) than can another country
Sometimes, it is cheaper to import a product than to make it yourself

6. Total Output Before Specializing
Total Output After Specializing
Country A Country B
Country A Country B
Coffee =25
Cashews =5
Coffee =40
Cashews =6

7. Comparative Advantage
The ability to produce a product relatively more efficiently, or at a lower opportunity cost.

8. Barriers to International Trade
Done through 2 major ways:
Tariff-a tax placed on imports to increase their price in the domestic market (graph)
Quota-a limit placed on the quantities of a product that can be imported-leads to a decrease in supply (graph)

9. 2 Kinds of Tariffs
Protective-a tariff high enough to protect less-efficient domestic industries
Real-life example
Revenue-a tariff high enough to generate revenue for the government
Customs duties

10. Arguments For Protection
National Defense (security)
Becoming too dependent on foreign countries
a nation should be self-sufficient in goods necessary for war

11. Promoting Infant Industries
New and emerging industries within a country that need protection from other more established foreign industries
Cars in Latin America

12. Protecting Domestic Jobs- employment protection argument
Tariffs and quotas are necessary to protect American jobs that could go foreign if not protected.
Complacency and improvement arguments

13. The Inevitable Argument
All nations have barriers to trade so barriers should be erected

14. The Industry Argument
Certain industries should be protected from competition

15. The Free Trade Movement
World Trade Organization (WTO) 1947-
Int’l agency that settles disputes, organizes trade negotiations, provides technical assistance for countries

16. NAFTA North American Free Trade Agreement
All about cost-benefit analysis
Free trade has allowed countries to capitalize on comparative advantages for everybody’s benefit

17. Trade Deficits and Surpluses
Trade deficit-occurs when the value of the products it imports exceeds the value of products it exports.
Trade Surplus-occurs when the value of products it exports exceeds the value of products it imports.

18. The International Value of the Dollar
A stronger dollar compared to other currencies- results in a trade deficit; our products become more expensive worldwide.
A weaker dollar compared to other currencies- results in a trade surplus, or balance of trade; our products become less expensive worldwide.

19. All Content Created by DJ Cook