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Lead off 5/7 What kinds of things could the government do to encourage people to buy things made in...
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Transcript of Lead off 5/7 What kinds of things could the government do to encourage people to buy things made in...
Lead off 5/7
• What kinds of things could the government do to encourage people to buy things made in the US?
• Do you think the government should do things to encourage people to buy American products? Why or why not?
International Trade Issues
Chapter 17-2,3
I. Barriers to Trade
A. Tariffs1. Revenue – small; in order for the government to make
money2. Protective – high in order to drive up import prices and
decrease quantity demanded
B. Quotas – limit to the number of imports in order to increase business for domestic companies
C. Others1. Inspection2. Licensing
II. Arguments for Protectionism
A. National Defense1. PROTECTIONISM: Dependence makes a country weak so domestic
industries tied to defense should be protected2. FREE TRADE
• It might be worth it to have a strong economy• Which industries are strategically important enough to protect?
B. Infant Industry Protection1. PROTECTIONISM: New companies should be protected from foreign
competition until they are established2. FREE TRADE: to politically difficult to remove those protections
C. Protecting Domestic Jobs1. PROTECTIONISM: imports cause loss of jobs to cheap foreign labor2. FREE TRADE: protection causes higher prices and inefficiency
D. Keeping Money at Home1. PROTECTIONISM: imports cause loss of American dollars to foreign
economies2. FREE TRADE: that money can come back
III. Free Trade Movements
A. Benefits of world Trade1. Specialization2. Variety of goods3. competition
B. Organizations • WTO – world trade organization• NAFTA – US, Mexico, and Canada• EU – European Union
Lead off 5/8
• How many different foreign currencies can you name?
• How would you pay for things if you went to another country?
IV. Foreign Exchange
A. Trade Balance1. Trade surplus – exports greater than imports2. Trade deficit – imports greater than exports
B. Exchange rate – the price of one country’s currency compared to another
C. Effect of trade balance on exchange rate1. Deficit will result in decrease in currency value2. Decreased currency value will result in growth in imports
(surplus)3. Surplus will result in increase in currency value4. Increased currency value will result in growth of imports (deficit)