1. Business in a Global Economy
Intro To Business
Chapter 10

2. The Global Marketplace
Learning Targets
Explain why the world has become a global economy
Explain why people and countries specialize in producing goods and services
The Global Economy
The interconnected economies of the nations of the world
We live in a global economy fueled by international trade
Globalization – the development of the global economy
Multinational Corporation
A company that does business in many countries and has facilities and offices around the world.
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3. The Global Marketplace
International Trade
The exchange of goods and services between nations
Types of Trade
Domestic Trade
The production, purchase and sale of goods within a country
World Trade
The exchange of goods and services across international boundaries
Why?
Cannot produce good because it does not have a suitable climate or raw materials
Business in one country may produce a better product or service at a cheaper rate.

4. The Global Marketplace
Imports
Goods and services that one country buys from another
What are some imports the U.S. receives?
Exports
Goods and services that one country sells to another
What are some of the U.S. exports?
Balance of Trade
Difference in value between a country’s imports and exports over a period of time
Trade surplus – Exports more than imports
Trade deficit – Imports more than exports
A country can have a trade deficit with one country but a surplus with another.

5. The Global Marketplace
Specialization
To focus on a particular activity, area or product.
Many countries specialize in certain products or service
Take advantage of these specialties by trading them in the global marketplace
Using Resources to Specialize
Countries specialize and trade some of the items that they produce in order to obtain other countries goods and services
Comparative Advantage
The ability of a country or company to produce a particular good more efficiently than another country or company
Ex. U.S., Japan and Germany have a comparative advantage in producing vehicles.

6. The Global Marketplace
Currency
Countries pay for products and services using currency (money).
Every country has their own form of currency
To trade with another country businesses/countries have to convert their money into that nations currency.
Currency is exchanged on the Foreign Exchange Market
Exchange Rates (
The price at which one currency can buy another currency (Changes day to day and from country to country)
Prices
Companies follow the change in exchange rates to find the best prices for products

7. Questions/Reflection
What is the global economy?
What is the difference between domestic trade and international trade?
Why would a country want its currency rate to appreciate?
What are 2 reasons why the world has become a global economy?
Explain why people and countries specialize in producing goods and services
Why does free trade generally increase people’s standard of living?
If the dollar decreases in value in relation to the Euro, what is the probable effect that this will have on exports to Europe?
If the dollar increases in relation to the British pound, what is the probable effect on imports from Britain?

8. Global competition Learning Targets Protectionism and Free Trade
Describe Free Trade
Indicate who benefits and who does not benefit from free trade
Protectionism and Free Trade
Global competition can lead to trade disputes
These occur when nations put barriers on trading particular items with another country
Should there be limits on trade?
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9. Global competition Protectionism
The practice of the government putting limits on foreign trade to protect businesses at home.
To keep out foreign competition
Also some countries don’t want to share what they produce
Reasons to restrict trade:
Foreign competition can lower the demand for products made at home
Companies at home need to be protected from unfair foreign competition
Industries that make products related to national defense need to be protected
The use of cheap labor in other countries can lower wages or threaten jobs at home
A country can become too dependant on another country for important products
Other countries might not have the same environmental or human rights standards

10. Global competition Trade Barriers
Government limiting competition from other countries, 3 types of trade barriers:
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 against another country for political or military reasons

11. Global competition Free Trade
Occurs when there are few or no limits on trade between countries
Economic or foreign policy determine which countries trade with each other.
Free Trade offers:
Opens up new markets in other countries
It creates new jobs, especially in areas related to global trade (shipping, banking, and communication)
Competition forces businesses to be more efficient and productive
Consumers have more choices in the variety, prices, and quality of products
Promotes cultural understanding and encourages countries to cooperate with each other
Helps countries raise their standard of living

12. Global Competition Trade Alliances
Many countries merge their economies into one huge market
Major Alliances:
North American Free Trade Alliance (NAFTA)
Free trade between U.S., Canada and Mexico
European Union
An economic and political union of 28 European members
Free movement of people (no passports), goods, services and capital.
One common currency
Association of Southeast Asian Nations (ASEAN)
Group of 10 Southeast Asian countries
Aims for economic growth, social progress, cultural development among its members, and peace and stability.

13. European Union

14. ASEAN Map

15. Questions/Reflection
Give 3 reasons for protectionism?
Give 3 reasons for free trade?
What are some of the major trade alliances in the world today?
Describe Free Trade
Indicate who benefits and who does not benefit from free trade
Why would a nation choose not to produce everything its citizens want?
Why is an embargo a stronger measure against free trade than tariffs?
Should companies making items for national defense b protected by trade barriers?