ch19 International Trade, Comparative Advantage, and Protectionism.pptVIP

Prepared by: Fernando Quijano Shelly Tefft;;The “internationalization” or “globalization” of the U.S. economy has occurred in the private and public sectors, in input and output markets, and in firms and households. The inextricable connection of the U.S. economy to the economies of the rest of the world has had a profound impact on the discipline of economics and is the basis of one of its most important insights: All economies, regardless of their size, depend to some extent on other economies and are affected by events outside their borders.;trade surplus The situation when a country exports more than it imports.;TABLE 19.1 U.S. Balance of Trade (Exports Minus Imports), 1929–2009(Billions of Dollars);Corn Laws The tariffs, subsidies, and restrictions enacted by the British Parliament in the early nineteenth century to discourage imports and encourage exports of grain. ;absolute advantage The advantage in the production of a good enjoyed by one country over another when it uses fewer resources to produce that good than the other country does. ;TABLE 19.2 Yield per Acre of Wheat and Cotton;? FIGURE 19.1 Production Possibility Frontiers for Australia and New Zealand Before Trade;TABLE 19.4 Production and Consumption of Wheat and Cotton after Specialization;? FIGURE 19.2 Expanded Possibilities After Trade;TABLE 19.5 Yield per Acre of Wheat and Cotton;TABLE 19.7 Realizing a Gain from Trade When One Country Has a Double Absolute Advantage;? FIGURE 19.3 Comparative Advantage Means Lower Opportunity Cost;terms of trade The ratio at which a country can trade domestic products for imported products. ;TABLE 19.8 Domestic Prices of Timber (per Foot) and Rolled Steel (per Meter) in the United States and Brazil;If exchange rates end up in the right ranges, the free market will drive each country to shift resources into those sectors in which it enjoys a comparative advantage. Only in a country with a comparative advantage will those products be compe