Warm Up- February 4, 2011

Warm Up- February 4, 20111. If Nigeria passed a law that taxed all imports from South Africa, this would be known as

A a tariff.B an embargo.C a quota.D an entrepreneur.

2. Many countries and groups around the world are willing to contribute to help reduce famine in Africa. What problem in Africa makes it difficult to get these contributions to the citizens of African countries?

A government instabilityB anti-African feelings around the worldC citizens do not want to accept the helpD deforestation limits the transportation routes

StandardsSS7E2 The student will explain how voluntary trade benefits buyers and sellers in Africa. a. Explain how specialization encourages trade between countries. b. Compare and contrast different types of trade barriers, such as tariffs, quotas, and embargos. c. Explain why international trade requires a system for exchanging currencies between nations.

Essential Question Why does international trade require a system for exchanging currencies between nations?

Today I will learn how voluntary trade benefits buyers and sellers because this has global economic implications. Whats in my Head?

Fill in a thought bubble with words and/or pictures to show what you know about the following topics: specialization, trade barriers and currency exchange

SpecializationDo what you do best; trade for the rest!Attempting to produce everything you want to consume yourself limits both your production and consumption possibilities.

To specialize, you must figure out what you do best. Economists define best as that which you produce at the lowest opportunity cost. Trading for the rest by selling the goods or services you can produce at low opportunity costs and then buying things you would produce at a high opportunity cost requires division of labor.

Specialization and trading goods and services with others can help everyone.

SpecializationSpecialization encourages trade and can be a positive factor in a countrys economy. Specialization occurs when one nation can produce a good or service at a lower opportunity cost than another nation.

Sometimes, specialization has not functioned as expected. What are the potential problems of over-specialization such as one-crop economies and lack of diversification? How can this impact a regions economy?

Currency Exchange

Before people from different countries can buy or sell anything to each other, they have to solve a basic problem.

Buyers have to be able to change their money from their country's currency to the seller's national currency. This is called "foreign exchange."

Each currency, whether it's the US dollar or the Haitian gourde, has a value in terms of other currencies. This is the "exchange rate."

Without a reliable supply of foreign exchange in each country, and without relatively stable exchange rates, world trade would drop drastically.

You wouldn't be wearing tennis shoes made in Asia, or eating an apple grown in New Zealand.

Exchange ratesExchange rates provide a procedure for determining the value of one countrys currency in terms of another countrys currency.

Without a system for exchanging currencies, it would be very difficult to conduct international trade.

Barriers to TradeA tariff is a tax placed on goods that one nation imports from another.

Many nations use tariffs to protect their industries from foreign competition.

Tariffs provide protection by acting to raise the price of imported goods.

Thus, tariffs encourage domestic firms to increase their production, and consumers are forced to pay higher prices for the protected goods.

Import quotasImport quotas offer another means of protectionism.

These quotas set a limit on the amount of certain goods that can be imported into a country and tend to be more effective than protective tariffs, which do not always stop consumers who are willing to pay a higher price for an imported good.

EmbargoAn embargo is an order designed to stop the movement of goods.

An embargo, issued by the government of one country, may restrict or suspend trade between that country and another nation.

A government may impose an embargo to hamper the military efforts of another government.

For example, the United States prohibits the export of weapons to countries that sponsor terrorism.

Sometimes a government imposes an embargo to express its disapproval of actions taken by another government. The embargo is intended to pressure the offending government to change its actions.

Closing- Dear TeacherWrite a brief letter to the teacher describing what they have learned about either or all of the following topics: Specialization, Trade Barriers or Currency Exchange.