Intl trade-exchange of goods and services among different nations Why does it exist -no country can provide

all the needs of its citizen alone -other country needs other resources that are scarce to them Comparative cost The amount the production of one product must be reduced to increase the product ion of another product Principle of comparative advantage -total outputt will be greatest when each good is produced by that nation which has the lower opportunity cost Foreign exchange System-a market in which the money used by one nation is used to purchase (is ex change for) the money used by another nation. Balance of payments Record all the transactions which take place between its residents and residents of all foreign nations- merchandise exports and imports, tourist expenditures, purchases and sales of shipping and insurance services, interest and dividends r eceived or paid abroad. Rate of exchange The price paid in one's money to acquire one unit of foriegn money The rate at which the money of one nation is exchanged for the money of another nation.