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Chapter 18
Trading with Other Nations
Section 1
1. Trade involves ____________________________ and __________________________.
2. What are imports?
3. Define exports.
4. Why do economies differ among countries?
5. No country can produce everything more cheaply than other nations because of
_______________________________________________.
6. What is absolute advantage?
7. How does specialization factor into absolute advantage?
8. Define comparative advantage.
9. Countries ________________________ products for which they have absolute or comparative
advantage in producing.
10. When does each country benefit from trade?
Discussion Questions
What are some types of products that the United States might have shortages of if we did not import?
Suppose that the United States has a comparative advantage producing movies with Great Britain. How
will the decision of the U.S. to produce movies help Great Britain?
Section 2
11. Why do we have exchange rates?
12. Define foreign exchange markets.
13. What is a fixed rate of exchange?
14. What is the advantage to using a fixed rate of exchange?
15. Define flexible exchange rate.
16. What is the difference between a positive and negative balance of trade?
17. What is a trade deficit?
Discussion Questions
Which is more significant to a country’s currency value: supply and demand or its political and economic
climate? Why?
How might a positive balance of trade be a negative factor of a nation’s economy?
Section 3
18. What are tariffs?
19. Define the two types of tariffs.
Revenue tariffs-
Protective tariffs-
20. What is an embargo? How have they been used in the past?
21. What are the 3 arguments made by protectionists?
1.
2.
3.
22. Free trade benefits a nation’s ________________________________________________.
Discussion Questions
Explain how embargoes differ from taxes and quotas in their intention and effect.
How would you respond to the argument that Free Trade leads to an increased standard of living?