Ch 10, 11, 12 - Slide 1

Learning ObjectivesLearning Objectives

1.1. ExplainExplain why nations need to trade with each other.

2.2. DescribeDescribe how currency exchange works.

3.3. ExplainExplain why countries and people specialize in producing goods and services.

Why It’s ImportantWhy It’s Important

Global trade doesn’t just influence business, it also affects all the countries and people of the world.

Ch 10, 11, 12 - Slide 2

The Global Marketplace The Global Marketplace The Global Economy is the interconnected economies of the nations in the world

International trade involves exchanging goods and services between countries

multinational corporation - company that does business in many countries and has facilities and offices around the world.

Ch 10, 11, 12 - Slide 3

Types of Trade Types of Trade Imports – G&S bought from another country Exports – G&S sold to another country

Balance of trade - difference between how much a country imports and exports

Exports > Imports = trade surplusExports < Imports = trade deficit

Ch 10, 11, 12 - Slide 4

MAJOR EXPORTS AND IMPORTS OF THE UNITED STATES

Source: Standard & Poor’s

Ch 10, 11, 12 - Slide 5

The Global Marketplace The Global Marketplace Countries specialize in resources they have

What does the middle east specialize in? What do we specialize in?

U.S. resources: human, natural, & production

Comparative advantage – ability of a country or company to produce a particular good more efficiently than another country or company.

Ch 10, 11, 12 - Slide 6

Currency Currency - countries pay for other country’s products with currency. Currency is another name for money

- types of $$: dollars, pesos, & yen

- foreign exchange market is made up of banks where different currencies are exchanged

- The exchange rate is the price at which one currency can buy another currency

Ch 10, 11, 12 - Slide 7

Exchange rates change from day to day and from country to country

favorable exchange rate - value of a country’s currency goes up compared to another country’s

unfavorable exchange rate - when the value of a country’s currency goes down compared to another country’s

Currency Currency

Ch 10, 11, 12 - Slide 8

????????????????????????

• What is it called when a country exports more than it imports?

• Trade surplus

• The price at which one currency can buy another currency is called what?

• The exchange rate

Ch 10, 11, 12 - Slide 9

HOMEWORK

• Rd. Pgs. 169-173

• ?’s 1-3 on Pg. 173

Ch 10, 11, 12 - Slide 10

Learning ObjectivesLearning Objectives

1)1) StateState the advantages of protectionism and free trade.

2)2) NameName types of trade barriers.

3)3) IdentifyIdentify some of the major trade alliances in the world today.

Why It’s ImportantWhy It’s ImportantGlobal trade doesn’t just influence business, it also affects all the countries and people of the world.

Ch 10, 11, 12 - Slide 11

Global Competition Global Competition • Protectionism - the practice of putting limits on foreign trade to protect businesses at home

• Trade barriers – put up to limit trade• Tariff - tax on imports to increase their price • Quota – limit on # of imported products• Embargo - gov decides to stop an import/export

Ch 10, 11, 12 - Slide 12

Why Protectionism??? Why Protectionism???

•Foreign competition can lower the demand for products made at home

•Companies at home need to be protected from unfair foreign competition

•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 like oil or grain

Ch 10, 11, 12 - Slide 13

?????????????????????????

• What is it called when there is a limit on the amount of imported goods?

• QUOTA

Ch 10, 11, 12 - Slide 14

Supporters of free trade believe there should be no limits on trade

To reduce limits on trade more countries are forming trade alliances with each other

Major Trade Alliances:

• NAFTA (North American Free Trade Agreement)

• European Union (EU)

• Association of Southeast Asian Nations (ASEAN)

Ch 10, 11, 12 - Slide 15

Why Free Trade??? Why Free Trade???

•It opens up new markets in other countries (300 million vs. 6 billion)

•It creates new jobs (global companies)

•Competition forces businesses to be more efficient and productive

•It promotes cultural understanding and cooperation between countries

Ch 10, 11, 12 - Slide 16

???????????????????????

• What is the major trade alliance in Europe called?

• The European Union

Ch 10, 11, 12 - Slide 17

HOMEWORK

• Review Key Concepts Pg. 174

• Questions 2-5