1. UNIT 2 – BUSINESS IN THE GLOBAL ECONOMY Unit 2.01 International Business Basics

2.  Imports  Exports  Balance of Trade  Balance of Payments  Exchange Rate KEY TERMS

3. items bought from other countries  US #1 importer in the world  In 2014, the US imported $2.41 Trillion  Top US imports: Top US imports 1.Oil 2.Machines, engines, pumps 3.Electronic equipment 4.Vehicles 5.Medical, technical equipment Note: US imports ALL our bananas, coffee, cocoa, spices, tea, silk, and crude rubber IMPORTS

4. goods and services made in the US that are sold to other countries  US 2 nd largest exporter in the world (behind China)  In 2014, the US exported $1.623 Trillion  T op US Exports T op US Exports 1.Machines, engines 2.Electronic equipment 3.Oil 4.Vehicles 5.Aircraft, spacecraft EXPORTS

5. Difference between a country’s total exports and total imports  Trade Surplus  Export (sells) more than it imports (buys)  Favorable balance of trade  Trade Deficit  Imports (buys) more than it exports (sells)  Unfavorable balance of trade BALANCE OF TRADE

6. US BALANCE OF TRADE Current U.S. Trade Deficit - $41.8 Billion

7. TOP 15 US TRADE PARTNERS

8. U.S. TOP TRADING PARTNERS RankCountryExportsImportsTotal TradeTrade Balance - World1,620,5322,347,6853,968,217-727,153 - European Union 276,142418,201694,343-142,059 1 Canada 312,421347,798660,219-35,377 2 China 123,676466,754590,430-343,078 3 Mexico 240,249294,074534,323-53,825 4 Japan 66,827134,004200,831-67,177 5 Germany 49,363123,260172,623-73,897 6 South Korea 44,47169,518113,989-25,047 7 United Kingdom 53,82354,392108,215-569 8 France 31,30146,87478,175-15,573 9 Brazil 42,42930,53772,96611,892 10 Taiwan 26,67040,58167,251-13,911

9. Difference between the amount of money that comes in to a country and the amount of money that goes out  Positive – when more money coming in to a country than going out  Negative – when more money going out of a country than coming in BALANCE OF PAYMENT

10.  Absolute Advantage – exists when a country can produce a good or service at a lower cost than other countries  Typically results from an abundance of natural resources or raw materials  i.e. coffee in South America or oil in Saudi Arabia TRADING AMONG NATIONS

11.  Comparative Advantage – situation in which a country specializes in the production of a good or service at which it is relatively more efficient  i.e. a country produces both computers & clothing better than any other country; but the market for computers is stronger/more profitable; so country decides to invest in computer production and buy clothing elsewhere TRADING AMONG NATIONS

12.  Foreign exchange rates – the value of a currency in one country compared with the value in another  Effects imports/exports  Example:  If the Toyota Motor Company can produce a car for export in Japan at a cost of 2,000,000 Yen, how much does that car cost in U.S. dollars?  If the exchange rate for Yen/U.S. Dollar is 200.00 yen to the dollar, the car would have to cost $10,000 at the factory for the Toyota company to realize its costs.  Toyota cars typically sell for $20,000+ US dollars, making the car very profitable to export to the US (for Japan)  As Yen/US Dollar exchange rates change to 100.00, it now costs $20,000 at the factory to make, therefore reducing the Japanese profit and lowering the incentive to export to the US INTERNATIONAL CURRENCY

13.  Factors affecting currency values  Balance of payments – when favorable, stronger currency  Economic conditions – when buying power of currency declines (i.e. high inflation), value of currency declines  Political disability – country instability weakens currency INTERNATIONAL CURRENCY

14. RECENT VALUES OF CURRENCIES Source: http://www.xe.com/http://www.xe.com/

15.  Calculate the cost of the following 5 items in local currency: ASSIGNMENT ItemUS$ Pack of gum$1.00 Pair of jeans$50.00 iPad2$500.00 Ford Focus$15,000 New home$300,000