Learning Objectives 1. Explain why nations need to trade with each other. 2. Describe how currency exchange works. 3. Explain why countries and people specialize in producing goods and services. Why It’s Important Global trade doesn’t just influence business, it also affects all the countries and people of the world. Ch 10, 11, 12 - Slide 1
The Global Marketplace The Global Economy is the interconnected economies of the nations in the world International trade involves exchanging goods and services between countries multinational corporation - company that does business in many countries and has facilities and offices around the world. Ch 10, 11, 12 - Slide 2
Types of Trade Imports – G&S bought from another country Exports – G&S sold to another country Balance of trade - difference between how much a country imports and exports Exports > Imports = trade surplus Exports < Imports = trade deficit Ch 10, 11, 12 - Slide 3
MAJOR EXPORTS AND IMPORTS OF THE UNITED STATES Source: Standard & Poor’s Ch 10, 11, 12 - Slide 4
The Global Marketplace Countries specialize in resources they have What does the middle east specialize in? What do we specialize in? U. S. resources: human, natural, & production Comparative advantage – ability of a country or company to produce a particular good more efficiently than another country or company. Ch 10, 11, 12 - Slide 5
Currency - countries pay for other country’s products with currency. Currency is another name for money - types of $$: dollars, pesos, & yen - foreign exchange market is made up of banks where different currencies are exchanged - The exchange rate is the price at which one currency can buy another currency Ch 10, 11, 12 - Slide 6
Currency Exchange rates change from day to day and from country to country favorable exchange rate - value of a country’s currency goes up compared to another country’s unfavorable exchange rate - when the value of a country’s currency goes down compared to another country’s Ch 10, 11, 12 - Slide 7
? ? ? ? ? ? • What is it called when • The price at which one a country exports more currency can buy than it imports? another currency is called what? • Trade surplus Ch 10, 11, 12 - • The exchange rate Slide 8
HOMEWORK • Rd. Pgs. 169 -173 • ? ’s 1 -3 on Pg. 173 Ch 10, 11, 12 - Slide 9
Learning Objectives 1) State the advantages of protectionism and free trade. 2) Name types of trade barriers. 3) Identify some of the major trade alliances in the world today. Why It’s Important Global trade doesn’t just influence business, it also affects all the countries and people of the world. Ch 10, 11, 12 - Slide 10
Global Competition • Protectionism - the practice of putting limits on foreign trade to protect businesses at home • • Trade barriers – put up to limit trade Tariff - tax on imports to increase their price Quota – limit on # of imported products Embargo - gov decides to stop an import/export Ch 10, 11, 12 - Slide 11
Why Protectionism? ? ? • Foreign competition can lower the demand for products made at home • Companies at home need to be protected from unfair foreign competition • The use of cheap labor in other countries can lower wages or threaten jobs at home • A country can become too dependent on another country for important products like oil or grain Ch 10, 11, 12 - Slide 12
? ? ? ? ? ? ? • What is it called when there is a limit on the amount of imported goods? • QUOTA Ch 10, 11, 12 - Slide 13
Supporters of free trade believe there should be no limits on trade To reduce limits on trade more countries are forming trade alliances with each other Major Trade Alliances: • NAFTA (North • • Ch 10, 11, 12 - American Free Trade Agreement) European Union (EU) Association of Southeast Asian Nations (ASEAN) Slide 14
Why Free Trade? ? ? • It opens up new markets in other countries (300 million vs. 6 billion) • It creates new jobs (global companies) • Competition forces businesses to be more efficient and productive • It promotes cultural understanding and cooperation between countries Ch 10, 11, 12 - Slide 15
? ? ? ? ? ? • What is the major trade alliance in Europe called? • The European Union Ch 10, 11, 12 - Slide 16
HOMEWORK • Review Key Concepts Pg. 174 • Questions 2 -5 Ch 10, 11, 12 - Slide 17
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