International Markets and Trade Dynamics
Delve into the principles of international markets and trade, exploring how voluntary trade generates wealth and the importance of understanding the balance of payments. Discover the law of comparative advantage and how it influences production decisions. Reflect on economic reasoning and the value of opinions backed by knowledge and evidence in decision-making processes.
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Presentation Transcript
Economics for Leaders Economics for Leaders Lesson 10: International Markets
Countries Countries don t trade don t trade People Do !
Voluntary Trade Creates Voluntary Trade Creates Wealth Wealth - - ALWAYS ALWAYS International trade National trade Regional trade Local trade
Balance of Payments Balance of Payments Current Capital account Account Goods & Financial flows Services
Please use the slides before this one in your presentation. The slides following this one are provided as options.
Fundamentally the same decision Fundamentally the same decision
Economic Reasoning Proposition #5 Economic Reasoning Proposition #5 ERP-5: Understanding based on knowledge and evidence imparts value to opinions. Opinions matter and are of equal value at the ballot box. But on matters of rational deliberation the value of an opinion is determined by the knowledge and evidence on which it is based. Statements of opinion should initiate the quest for economic understanding, not end it.
Who should produce what? Who should produce what? The Law of Comparative Advantage Through specialization and exchange, both parties can gain from lower costs and greater output even if one party does both things better. What is your lowest opportunity cost alternative?
Comparative Advantage Comparative Advantage Producing a Meal Producing a Meal Barbie Ken Cooking 10 min 40 min 30 min Cleaning 20 min 30 min 70 min Totals
Opportunity Costs Opportunity Costs Barbie Ken 1/2 cleaning 4/3 cleaning Cooking Cleaning 2/1 cooking 3/4 cooking
What Will Ken & Barbie Do? What Will Ken & Barbie Do? Working Independently Barbie Produces a Meal in 30 Minutes Ken Produces a Meal in 70 Minutes Barbie Has An Absolute Advantage Would Barbie Produce Two Meals? With Trade/Cooperation Barbie Spends 20 Minutes Cooking Ken Spends 60 Minutes Cleaning They Both Gain!
Remember Remember Nations Are Not Different Nations Are Not Different Goods are Produced at Least Cost When People Specialize According to the Principle of Comparative Advantage Lesson - Don t Try to Do Everything; It is Not Efficient Trade Between Countries Creates Wealth Examples Ken and Barbie Have Time for Other Activities
Banana size regulations Banana size regulations
Mexican Truck Now Allowed on US Highways Mexican Truck Now Allowed on US Highways
USMCA USMCA Replaces NAFTA Replaces NAFTA Signed but not yet ratified Signed but not yet ratified by legislatures in each by legislatures in each country country
NAFTA NAFTA 1994 1994 - - 2018 2018
WTO (formerly GATT) WTO (formerly GATT)
European Monetary Union European Monetary Union
Exploring International Trade Exploring International Trade http://atlas.cid.harvard.edu/ http://wits.worldbank.org/trade- visualization.aspx http://www.visualcapitalist.com/interactive -mapping-flow-international-trade/
Trade Balance Trade Balance Imports Exports
Pierre Sells (Exports) Bread . . . Pierre Sells (Exports) Bread . . . Then What? Then What?
What Can Pierre Do with What Can Pierre Do with $$US $$US? ? Take his Cheri to his Take his Cheri to his favorite bistro at the favorite bistro at the Eiffel Tower? Eiffel Tower? Mais Mais NON! NON! Buy U.S goods & Buy U.S goods & services services OR OR U.S. assets ? U.S. assets ? Oui! Oui! Oui! Oui!
