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2 Chapter 10 Business in a Global Economy Section 10.1 The Global Marketplace

3 Read to Learn Explain why the world has become a global economy. Explain why people and countries specialize in producing goods and services.

4 The Main Idea International trade has increased because more countries specialize and offer their goods and services to other countries. Also, the value of one nation s currency in relation to other currencies affects what it buys and sells to other nations.

5 The Global Economy We live in a global economy fueled by international trade. The development of the global economy is called globalization. global economy the interconnected economies of the nations of the world international trade the exchange of goods and services between nations

6 The Global Economy Sony is an example of a multinational corporation. multinational corporation a company that does business in many countries and has facilities and offices around the world

7 International Trade Trade allows countries to meet their individual wants and needs as well as to help their own economies. trade a specific area of business or industry, a skilled occupation, or the people who work in a specific area of business or industry

8 Multinationals The top multinational companies include Sony, Coca-Cola, Toyota, and Nike.

9 Figure 10.1 Major Imports and Exports of the United States

10 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.

11 Imports and Exports One country s imports are another countries exports. imports goods and services that one country buys from another country exports goods and services that one country sells to another country

12 Balance of Trade The United States has a favorable balance of trade with Australia. balance of trade the difference in value between a country s imports and exports over a period of time

13 Graphic Organizer Trade Surplus A country exports more that it imports Trade Deficit A country imports more that it exports

14 Specialization To specialize means to focus on a particular activity, area, or product. Specialization builds and sustains a market economy.

15 Using Resources to Specialize Countries can specialize and trade some of the items that they produce in order to obtain other countries goods and services.

16 Using Resources to Specialize Countries that specialize may have a comparative advantage. comparative advantage the ability of a country or company to produce a particular good more effectively than another country or company

17 Currency To trade with another country, businesses must convert their money into that nation s currency. Currency is exchanged on the foreign exchange market.

18 World Currencies Several countries have the same currencies or use the same currencies.

19 Currency The exchange rate for currencies changes from day to day and from country to country. exchange rate the price at which one currency can buy another currency

20 Currency Companies follow the exchange rates to find the best prices for products. A country with an appreciated exchange rate can buy more of another country s products.

21 1. What is the global economy? The global economy is the interconnected economies of the nations of the world.

22 2. What is the difference between domestic trade and international trade? Domestic trade is between parties within a country. International trade is between parties in different countries.

23 3. Why would a country want its currency to appreciate? A country might want its currency to appreciate so that citizens can buy more goods and services in other countries.

24 End of Chapter 10 Business in a Global Economy Section 10.1 The Global Marketplace

25 Click here to advance to the next slide.

26 Chapter 10 Business in a Global Economy Section 10.1 The Global Marketplace

27 Read to Learn Describe free trade. Indicate who benefits and who does not benefit from free trade.

28 The Main Idea Protectionism is the practice of putting limits on foreign trade to protect businesses at home. However, protectionism decreases competition and generally increases the prices that consumers pay for goods and services. More nations are moving toward free trade.

29 Protectionism and Free Trade Global competition often leads to trade disputes. Protectionism and free trade are two opposing points of view involved in trade disputes.

30 Protectionism Japan practices protectionism in the areas of rice farming and auto production. protectionism the practice of the government putting limits on foreign trade to protect businesses at home

31 Protectionism Reasons to Restrict Trade Foreign competition can lower the demand for products made at home. Companies at home need to be protected from unfair competition. Industries that make products related to national defense need to be protected.

32 Protectionism Reasons to Restrict Trade 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. Other countries might not have the same environmental or human rights standards.

33 Protectionism A tariff is an example of a trade barrier. tariff a tax placed on imports to increase their price in the domestic market

34 Trade Sanctions A government can impose a trade sanction, or penalty, on other countries, usually by adding tariffs.

35 Protectionism A quota is another example of a trade barrier. quota a limit placed on the quantities of a product that can be imported

36 Protectionism An embargo is a trade barrier that is usually used for political or military reasons. embargo a ban on the import or export of a product

37 Free Trade Supporters of free trade think all countries should be free to compete anywhere in the world without restrictions. free trade when there are few or no limits on trade between countries

38 Free Trade Benefits of Free Trade Free trade opens up new markets in other countries. Free trade creates new jobs. Competition forces businesses to be more efficient and productive.

39 Free Trade Benefits of Free Trade Consumers have more choices in the variety, prices, and quality of products. Free trade promotes cultural understanding and encourages countries to cooperate with each other. Free trade helps countries raise their standard of living.

40 Free Trade To reduce limits on trade, nations form trade alliances. NAFTA (North American Free Trade Agreement) combined the economies of the United States, Canada, and Mexico.

41 Free Trade Some people opposed NAFTA because they feared some workers would be displaced when trade barriers were lowered.

42 Graphic Organizer North American Free Trade Agreement (NAFTA) United States, Canada, Mexico European Union (EU) Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, United Kingdom Association of Southeast Asian Nations (ASEAN) Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam

43 1. Give three reasons for protectionism. protects businesses from unfair competition, from countries that violate U.S. human rights or environmental standards, and from overdependence on another country s products

44 2. Give three reasons for free trade. encourages competition, gives consumers more choices for products, promotes cultural understanding

45 3. What are some of the major trade alliances in the world today? NAFTA, the EU, and ASEAN

46 End of Chapter 10 Business in a Global Economy Section 10.1 The Global Marketplace