ECONOMICS: Chapter 18 Questions – Trading With Other Nations

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Ch. 18.1: The Benefits of World Trade

1. This is the idea that a nation should produce and export a limited number of goods for which it is particularly suited.

2. Goods bought from other countries for domestic use are known as this.

3. These are goods sold to other countries.

4. This is the ability of a country to produce a product at a lower opportunity cost than another country.

5. This is the ability of a country, using the same quantity of resources as another country, to produce a specific product at a
   lower cost.

Ch. 18.2: Financing World Trade

6. This is the fall in the price of a currency through the action of supply and demand.

7. This allows the forces of supply and demand to set the price of various currencies.

8. These are markets that buy and sell foreign currency for businesses that want to import goods from other countries.

9. When a national government sets the value of its currency in relation to other currencies it is following this.

10. This is the lowering of a currency's value in relation to other currencies by government order.

11. This is the difference between the value of a nation's exports and its imports.

Top Trading Partners of the United States 2005
(in billions of dollars)
Country | Exports To | Imports from | Balance of Trade
Canada | $211.9 | $290.4 | –$78.5
Mexico | $120.4 | $170.1 | –$49.7
Japan | $55.5 | $138.0 |
China | $41.9 | $243.5 |
United Kingdom | $38.6 | $51.0 |
Germany | $34.2 | $84.8 |
South Korea | $27.8 | $43.8 |
France | $22.4 | $33.8 |
Taiwan | $22.1 | $34.8 |

Use the table above to answer the following questions.
12. 	Replace the missing Balance of Trade numbers. See above.

13.	 With which country in the table does the U.S. have the largest trade deficit?

14.	 With which country in the table does the U.S. have the smallest trade deficit?

15.	 With which country in the table does the U.S. trade the most?

16.	 This is the price of one nation's currency in terms of another nation's currency.

17.	 What is the purpose(s) of the International Monetary Fund?

18. What determines flexible exchange rates?

19. How would depreciation of the Japanese yen impact Japanese products sold in the United States?

20.	 Explain the change in foreign exchange rates in the United States since 1971.

Exchange Rates
Country | U.S. $ equiv. | Currency per U.S. $
Argentina (peso) | 0.3163 | 3.1615
Australia (dollar) | 0.9393 | 1.0646
Britain (pound) | 1.9844 | 0.5039
Chile (peso) | 0.002205 | 453.55
China (yuan) | 0.1407 | 7.1085
Japan (yen) | 0.009684 | 103.27
Mexico (peso) | 0.09351 | 10.693
Russia (ruble) | 0.04163 | 24.019

	Use the table above to answer the following questions.
21.	 How much U.S. money would you receive in exchange for one Mexican peso?

22. How much U.S. money would you receive in exchange for one Japanese yen?

	23. How many Chinese yuan would you receive for each U.S. dollar?

	24. How many Russian rubles would you receive for each U.S. dollar?

Ch. 18.3: Restrictions on World Trade

25. This is a restriction imposed on the number of units of a particular good that can be brought into a country.

26. This was a regional trade agreement between the United States, Canada and Mexico.

27. What was NAFTA and how did it impact trade with Mexico?

28. Explain some criticisms of free trade agreements such as NAFTA.

29. What is a tariff?

30. 	What is the purpose of a protective tariff?

31. This is a tax on imports used primarily to raise government income without restricting imports.

32. This is an organization of European nations whose goal is to encourage economic integration in a single market.

33.	 This is a complete restriction on the import or export of a particular good.

34. 	These are people who argue for trade restrictions.