Download 1. Define Specialization:

1. Define Specialization:
Producing a few types of
goods and services instead
of producing a wide variety
of goods and services
2. Describe 3 reasons why countries
choose to specialize in producing
certain products:
a. CLIMATE : the weather must be right to
make/grow the products
b. GEOGRAPHY: must have land, terrain,
natural resources to make the products
c. HUMAN RESOURCES: must have
education and skills to make prod the
products
d. CAPITAL GOODS: must have the tools
to make the products
3. Give two examples of
specialization (ex. Japan specializes
in producing electronics and
automobiles):
a. Saudi Arabia specializes in producing
oil.
b. China specializes in manufactured
goods (ex. clothing).
4. What is a potential problem of
over-specialization (ex. If Kenya only
produced tea, what would happen if the tea
crop was destroyed?):
Kenya would have no crops to trade with
other countries and its GDP would go
down.
5. What does it mean for countries
to be interdependent?
 Interdependence occurs when
people and nations depend on
one another to provide the goods
and services that they want. The
more people specialize and trade,
the more interdependent they
become.
6. Give an example of
interdependence.
 Farmers depend on merchants to
sell their crops. Merchants
depend on farmers to give them
crops to sell in their stores.
7. Why do countries trade with each
other?
 Countries trade because they are
more interdependent today due to
specialization.
 They trade goods & services they
specialize in for goods & services
they want/need from other
countries.
 They trade because they expect to
benefit.
8. Define exchange rate:
 A system for determining the
value of one country’s money
in terms of another country’s
money
9. Why is there a need for an
exchange rate when countries
trade? (hint: think about what would happened if
there was NO exchange rate)
 An exchange rate is needed for
international trade b/c it makes trade b/w
countries easier.
 Without a system for exchanging one
country’s currency for another, it would be
difficult or even impossible to trade since
countries would not know how much their
products are worth in other countries.
10. List and describe three barriers
to trade.
a. EMBARGO: when a country or
countries refuse to trade with a certain
country (ex. OPEC embargo on the
United States).
b. QUOTA: a limit on the amount of goods
imported into a country
c. TARIFF: taxes on goods imported into a
country
11. Define G.D.P.:
 the total value of all the goods
and services produced in a
country in one year
12. Define G.D.P. per capita:
 the average value of goods
and services available to each
person in a country
13. In your own words, what can
GDP and GDP per capita tell us
about a country’s economy?
 GDP tells us if a country’s economy is
growing or shrinking, healthy or sick.
 It also tells you if a country has a low,
middle, or high income.
 GDP per capita gives you hints about an
individual’s standard of living.
14. What are three ways in which a
country can increase its productivity,
and therefore its GDP? Then give an
example of each.
a. INCREASE AMOUNTS OF CAPITAL GOODS
(ex. more shovels)
b. IMPROVE CAPITAL GOODS (IMPROVE YOUR
TECHNOLOGY) (ex. instead of shovels, use
tractors)
c. IMPROVE THE QUALITY OF LABOR (INVEST
IN HUMAN RESOURCES, IMPROVE
EDUCATION) (ex. educate a farmer on how
to better grow his crops)
15. What is the relationship between
education and GDP per capita?
 There is a direct relationship
between education and GDP
per capita.
 Education is costly so if a
country has a low GDP per
capita, then the country will
most likely have a low rate of
education, and vice versa.