Name ______

Southern and Eastern AsiaEconomic Understandings

SS7E9The student will explain how voluntary trade benefits buyers and sellers in Southern and Eastern Asia

a. Explain how specialization encourages trade between nations

b. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.

c. Explain why international trade requires a system for exchanging currencies between nations.

  • No country can produce all of the goods and services that they need.
  • Countries specialize in producing the goods and services that they can provide best and most efficiently.
  • They sell these goods to other countries that need them.
  • Using the money they get from those sales they buy from other countries the products they themselves cannot produce.
  • No country can be completely self-sufficient (produce all the goods and services it needs)
  • Specialization builds a strong economy and provides countries with the money needed to buy things they cannot produce.
  • Countries of Southern and Eastern Asia are very different economically.
  • India has a lot of farmland, but not enough to feed its huge population.
  • India has a booming industrial and technological economy.
  • India focuses on these businesses which are most profitable.
  • They can sell that which they specialize in so that they can afford to import things that they need.
  • China is similar. They too cannot produce enough food for their huge population.
  • Some areas of China are strictly agricultural.
  • Some large cities have modern industries.
  • Japan has few natural resources.
  • Specialized industries have been developed to earn money to buy food and raw materials from other countries.
  • North Korea has not been able to successfully increase harvests on their farms.
  • North Korean government has turned to industries that use their natural resources of coal and iron to keep the economy going.
  • Specialization allows countries to produce what they do best and provides and income to purchase the rest (what they still need).
  • Trade barriers slow down or prevent one country from exchanging goods with another.
  • Some trade barriers protect local industries from lower priced goods made in other countries.
  • Other trade barriers are created due to political problems between countries.
  • Trade is stopped until the problem is solved.
  • Tariff- tax placed on goods when imported (brought into) one country from another.
  • Purpose of tariff is usually to make the imported good more expensive than the local good.
  • Protective tariff- protects local manufacturers from imported goods that are made cheaper inother countries.
  • Quota- limits the amount of foreign goods that can come into a country.
  • Quotas set a specific amount or number of a particular product that can be imported or acquired in a given period of time.
  • Embargo- One country announces it will no longer trade with another country in order to isolate that country and cause problems with its economy.
  • Often done when countries are having political problems, but can cause problems for both countries.
  • Most countries in Southern and Eastern Asia have their own currency (money).
  • Exchange rate-system to change from one currency to another.
  • Our currency is based on the dollar. Much of Europe is based on the Euro.
  • In Southern and Eastern Asia there are many different types of currencies.
  • The exchange rate tells how much of one country’s currency equals another country’s currency.
  • Exchange rates can vary on a daily basis.

Example:

Country

United States

India

China

Japan

North Korea

Vietnam

Currency

Dollar ($)

Rupee

Yuan

Yen

Won

Dong

Equivalent in U.S. Dollars

$1.00

41.5 per dollar

7.61 per dollar

117 per dollar

140 per dollar

16,000 per dollar