MicroeconomicGLOBALMARKETSINACTION幻灯片.ppt

7;iPods, Wii games, and Roots sweaters are just three of the items you might buy that are not produced in the United States. In fact, most of the goods that you buy are produced abroad and transported here in container ships or cargo jets. And it’s not only goods produced abroad that you buy—it is services too. All these activities are part of the globalization process that is having a profound effect on our lives. Why do we go to such lengths to trade and communicate with others in faraway places? ;Because we trade with people in other countries, the goods and services that we can buy and consume are not limited by what we can produce. Imports are the good and services that we buy from people in other countries. Exports are the goods and services we sell to people in other countries.;International Trade Today Global trade today is enormous. In 2009, global exports and imports were $31 trillion, which is more than half the value of global production. In 2009, total U.S exports were $1.6 trillion, which is about 11 percent of the value of U.S. production. In 2009, total U.S. imports were $2 trillion, which is about 14 percent of the value of U.S. production. Services were about 33 percent of total U.S. exports and 19 percent of total U.S. imports.;What Drives International Trade? The fundamental force that generates trade between nations is comparative advantage. The basis for comparative trade is divergent opportunity costs between countries. National comparative advantage as the ability of a nation to perform an activity or produce a good or service at a lower opportunity cost than any other nation.;The opportunity cost of producing a T-shirt is lower in China than in the United States, so China has a comparative advantage in producing T-shirts. The opportunity cost of producing an airplane is lower in the United States than in China, so the United States has a comparative advantage in producing airplanes. Both countries can reap gains from trade by specializi