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The unequal distribution of resources promotes a complex network of trade among countries.

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Presentation on theme: "The unequal distribution of resources promotes a complex network of trade among countries."— Presentation transcript:

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2 The unequal distribution of resources promotes a complex network of trade among countries.

3  Every country in the world posses different types and quantities of resources.  When nations do not have all the resources and goods that they want, they usually establish a trading network.  In addition, countries may specialize in producing certain goods or services, rather than producing all the items they may need or desire.

4 Exports/Imports Items that countries have in abundance are sold to other countries. These are called exports. Items that are in short supply are bought from other countries. These are called imports.

5 What types of goods does the U.S. export the most? capital goods, industrial supplies, raw materials, agriculture products, and automobiles What types of goods does the U.S. import the most? crude oil, refined petroleum, automobiles, food and beverages, raw materials, and consumer goods

6 Why governments try to balance their countries imports and exports:  If people buy too many foreign goods, domestic businesses may loose profits and fail.  Excessive imports increases a country’s debt to other countries which weakens the economy.

7 The key to international trade is specialization. Specialization is the idea of countries only making those products that they produce the most efficiently.

8  Absolute Advantage is a country’s ability to produce more of a given product than can another country  Comparative Advantage is a country’s ability to produce a given product relatively more efficiently than another country – or – production at a lower opportunity cost  Opportunity Cost is the value of the next-best alternative that must be given up when scarce resources are used for one purpose instead of another.

9  Even though one country may have an absolute advantage over another country in producing all concerned products it can still be beneficial for both countries to specialize and trade.

10 “Yard Work”

11 Trade Alliances Because the international marketplace is interdependent, many countries create free- trade agreements or join international organizations to promote free-trade and the reduction of trade barriers.

12 WTO – World Trade Organization World Bank IMF - International Monetary Fund


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