Exploration and Expansion: New Patterns of Trade Ms. James

Trade emerges in the ‘New World’ The Columbian Exchange takes place. Contact between the Native Americans and colonists have led to the widespread exchange of plants, animals, and disease.

Mercantilism = “Hands On Economy” New type of economic policy Basic Principles Nation’s strength depends on its wealth measured in silver and gold Fixed amount of wealth in world, and nation’s compete for it Balance of trade is important to gaining wealth Countries should seek to limit imports and maximize exports "Hands-on" state-oriented systems Economic systems in which the state directs or controls economic activity through economic planning, with economic institutions being primarily publicly owned. Feudalism Mercantilism

Mercantilism Cont… Basic Principles Cont… Countries should have its own source for raw materials and precious metals to avoid dependence on others. Colonies exist only as a way for the mother country to make profit A country’s colonies should not trade with any other countries.

Balance of Trade Under Mercantilism, nations can gain wealth in two ways: Extract gold and silver from mines It could sell more goods than it bought (Exports > Imports) Balance of Trade- the difference in value between what a nation imports and exports over a period of time. How do you discourage people from buying other countries goods? (a.k.a imports)

Balance of Trade Cont… Creating favorable balances of trade Place tariffs (tax) on imported goods = makes imported goods more expensive People are discouraged from buying Finished goods (exports) sell for more than raw materials. Cloth is more expensive than raw wool. Control overseas sources of raw materials (colonies) Free trade is a system of trade policy that allows traders to act and or transact without interference from government. According to the law of comparative advantage the policy permits trading partners mutual gains from trade of goods and services.

Economic Policy is bad for colonies Mother Country gets all the benefits, but the colonies have no say in economic policy. Leads to trouble! Limited trade! Colonies dislike! If mercantilism was an ad on facebook, the colonies would click the dislike button or they would un-friend it!

Impact on Society Businesses increase in number Wealthy merchant middle class grows Columbian exchange impacts foods

The Rise of Capitalism Capitalism- economic system in which most businesses are privately owned. Price Revolution occurs (1470 – 1620) Inflation pushes prices higher in Europe

A New Business Organization Joint-Stock Company Businesses formed by groups of people who jointly make an investment and share in the profits and losses. Ex. British East India Company & Virginia Company