Intro to Business April 15, 2015 Unit 2 Test Chapter 10 – Business in a Global Economy Political Cartoon

The Global Economy Global economy – the interconnected economies of the nations of the world International trade – the exchange of goods and services between nations Global corporation – a company that does business in many countries and has facilities and offices around the world.

Trade A specific area of business or industry A skilled occupation The activity of buying or selling goods and services in an domestic or international markets Trading goods and services allows countries to meet their individual wants and needs as well as help their economy

Types of Trade Domestic trade is the production, purchase, and sale of goods and services within a country World trade is the exchange of goods and services across international boundaries World trade may take place because a country cannot produce a desired good due unsuitable climate or lack of raw materials – OR – businesses in one country produce better products or services at cheaper prices World trade has increased considerably since the 1970’s due to better transportation, telecommunications, and a decrease in trade barriers

Imports/Exports Imports are goods and services that one country buys from another country Exports are goods and services that one country sells to another country What products does the US import/export? (zoom to 300%) Who are the United States’ trading partners?

Balance of Trade When a country exports more than it imports, it has a trade surplus When a country imports more than it exports, it has a trade deficit A balance of trade is the difference in value between a country’s imports and exports over a period of time The balance of trade can be calculated by country or overall Do you think the US has a trade surplus or trade deficit?

Protectionism and Free Trade In the global marketplace, countries benefit from buying one another’s products Global competition often leads to trade disputes which occur when nations place barriers on trade At the heart of most trade disputes is whether trade should be unrestricted or whether there should be limits on trade Protectionism and free trade are opposing points of view

Protectionism Protectionism is the practice of the government putting limits on foreign trade to protect the businesses at home Reasons to restrict trade include: 1. Lower demand for products made domestically 2. Industries that make products related to foreign defense need to be protected 3. Use of cheap labor in other countries can lower wages or threaten jobs at home 4. A country can become too dependent on another country for important products like oil, steel or grain 5. Other countries may not have the same environmental or human rights standards

Protectionism To limit competition from other countries, governments develop trade barriers such as: Tariff – a tax placed on imports to increase their price in the domestic market Quota – a limit placed on the quantities of a product that can be imported Embargo – a ban on the import or export of a product – rare and usually used for political or military reasons

Free Trade Free trade occurs when there are few or no limits on trade between countries. The benefits are: Opens up new markets in other countries Creates new jobs Competition forces businesses to be more efficient and productive Consumers have more choices in the variety, price and quality of products Helps countries raise the standard of living

Free Trade – Trade Alliances To reduce limits on trade, countries form trade alliances such as: o North American Free Trade Agreement (NAFTA) – combined the economies of the United States, Canada and Mexico o European Union (EU) o Association of Southeast Asian Nations (ASEAN)

Globalization Ian Goldin: Navigating our global future

2014 Ebola Outbreak Effecting Global Economy Bitter sweets: Could Ebola affect chocolate supplies? Cadbury Cocoa and Chocolate

2014 Ebola Outbreak Effecting Global Economy

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