International trade

• What does international trade involve?

  Goods and services going out of a country
• What is an export?

  Goods and services sold out to other countries
• What is an import?

  Goods and services bought from other countries
• Why do countries trade with each other?

  1. Supplying needs and wants

  • Countries may lack resources and technology
  • Example: Australia imports cars from Japan

  1. Price advantage

  • Goods may be cheaper in other countries
  • Encourages businesses to import for higher profits

  1. Trade specialization

  • Countries specialize in producing limited goods and services
• What does it mean when a country has a trade deficit?

  It spends more money on imports than it earns from exports
• What does it mean when a country has a trade surplus?

  It earns more money from exports than it spends on imports
• What is the perfect balance of payments?

  Money spent on imports equals money spent on exports
• What is trade specialization?

  Countries specialize in producing large amounts of a limited number of goods and services
• How does the price advantage influence international trade?

  It encourages businesses to import cheaper goods rather than producing them domestically