V. Answer the following questions:

1. Why do countries trade with each other?

2. What is absolute advantage?

3. Why do nations gain when they specialize?

4. How can you explain the term «comparative advantage»?

5. What does the law of comparative advantage explain?

6. Why do most countries restrict trade?

7. In what ways do some countries restrict trade?

8. What is tariff?

9. How can quotas restrict trade?

VI. Define the terms:

transaction

to specialize

to restrict trade

revenue

absolute ad vantage

tariff

revenue tariff

protective tariff

quota

expect subsidy

dumping

administrative red tape

VII. Translate into English:

1. Держави ведуть торгівлю з тих самих причин, що й приватні особи та фірми. 2. Держави отримують зиск від торгівлі тому, що вона дає їм можливість обмінювати над­лишок товару, який вони виробляють, на товар, у якому вони мають потребу. 3. Природні багатства, транспортні засоби, трудові ресурси дали поштовх розвиткові окремих видів промисловості. 4. Різниця в кліматичних умовах, при­родних багатствах, трудових ресурсах зробила можливою спеціалізацію з виробництва окремих видів товарів. 5. Не­зважаючи на значні переваги торгівлі, більшість країн запро­ваджує обмеження на торгівлю. 6. Упродовж історії свого існування США розглядали фіскальні тарифи як головне джерело надходжень. 7. Для того щоб захистити вітчизняну промисловість від іноземної конкуренції, існують тарифи, мета яких — зробити зарубіжний товар дорожчим за такий самий товар, виготовлений у країні. 8. Квоти знижують рівень конкуренції, з якою може зіткнутися вітчизняна промис­ловість, обмежуючи кількість імпортованого товару.

VIll. Read and dramatize the following dialogue:

1. : It's amazing!

2. : What's amazing?

   1. : We had an assignment the other day to discover how much we depend on foreign trade.

   2. : What's so amazing about that?

      1. : I found that my clock radio was made in Japan, my slippers came from Taiwan, my robe from India, my comb was made in Mexico, my sweater was from Scotland and my shoes from Italy.

      2. : And I want to treat you to the hot chocolate made by a Swiss company out of cocoa beans from Ghana and sweetened with sugar from Ecuador.

         1. : I see that we are all dependent upon the goods and services from other countries, and imports have risen steadily almost every year in the past.

         2. : But why do countries trade with each other?

            1. : Trade among nations takes place for the same reasons that it does within a nation; to obtain goods and services that a region could not produce itself, or to obtain them at a lower cost than they could be produced for at home. This is explained by the principle of comparative advantage.

            2. : But I've heard that some countries put up barriers to trade and what is the reason for that?

               1. : Despite the advantage of international trade, most nations have erected artificial barriers to that trade. These barriers are usually in the form of tariffs or quotas.

               2. : And how are payments made in international trade?

                  1. : Imports must be paid for in a currency that is acceptable to the seller. In order to facilitate these transactions, there is a market for the currencies of all trading nations. The selling price of one nation's currency in term of the cu­rrencies of other nations is known as its «exchange rate». Exchange rates fluctuate in accordance with the laws of supply and demand.

                  2. : How do exchange rates' fluctuations influence the nation's exports and imports?

A.: When the value of a nation's currency is decreasing in terms of other currencies, its exports are likely to increase because they will be less expensive to people in foreign countries. Imports, in these circumstances, are likely to decrease because foreign goods will become more expensive. When a nation's currency is appreciating in terms of other currencies, the opposite is likely to occur.

B.: I see. And why do economists look to the balance of payments?

A.: The balance of payments summarizes the transactions that have taken place in international trade over a given period of time, usually one year. Economists look to the balance of payments for clues to future trends in the value of a nation's currency and other consequences of its foreign trade.