Ch. 10 Global EconomyCh. 10 Global Economy

10.1 The Global Marketplace10.1 The Global MarketplaceObjectives:Objectives:

Explain why the world has become an global Explain why the world has become an global economyeconomy

Explain why people and countries specialize in Explain why people and countries specialize in producing goods and servicesproducing goods and services

The Global EconomyThe Global Economy

Global economy: the interconnected Global economy: the interconnected economies of the nations of the world.economies of the nations of the world.

International Trade: Involves the exchange International Trade: Involves the exchange of goods and services between nationsof goods and services between nations The development of the global economy is The development of the global economy is

often called globalizationoften called globalization Multinational Corporation: A company that Multinational Corporation: A company that

does business in many countries and has does business in many countries and has facilities and offices around the world. facilities and offices around the world.

International TradeInternational Trade

Trade: an exchange of goods and/or Trade: an exchange of goods and/or services for money/goods/servicesservices for money/goods/services

Types of trade: Types of trade: Domestic: the production, purchase, and Domestic: the production, purchase, and

sale of goods and services within a sale of goods and services within a country.country.

Imports: goods and services that one Imports: goods and services that one country buys from another countrycountry buys from another country

Exports: goods and services that one Exports: goods and services that one country sells to another countrycountry sells to another country

Balance of TradeBalance of Trade

Balance of Trade: the difference in Balance of Trade: the difference in value between a country’s imports value between a country’s imports and exports over a period of timeand exports over a period of time Deficit: imports greater than exportsDeficit: imports greater than exports Surplus: exports greater than importsSurplus: exports greater than imports

Do you think the United States has a Do you think the United States has a trade deficit or trade surplus?trade deficit or trade surplus?

SpecializationSpecialization

Specialization: to Specialization: to focus on a particular focus on a particular activity, area, or activity, area, or product.product. Bakeries make baked Bakeries make baked

goodsgoods Auto mechanics work Auto mechanics work

on automobileson automobiles Specialization builds Specialization builds

and sustains a market and sustains a market economyeconomy

Comparative Comparative advantage: the ability advantage: the ability of a country or of a country or company to produce a company to produce a particular good more particular good more efficient than another efficient than another country or companycountry or company

Comparative Comparative advantage helps advantage helps improve the standard improve the standard of living for each of living for each countrycountry

CurrencyCurrency

Exchange Rates: the price at which Exchange Rates: the price at which one currency can buy another one currency can buy another currency.currency. Exchange rates change from day to dayExchange rates change from day to day The amount a country’s currency is worth The amount a country’s currency is worth

depends on how many other countries depends on how many other countries want to buy its productswant to buy its products

Companies follow exchange rates to find Companies follow exchange rates to find the best prices for productsthe best prices for products

How do you think this works?How do you think this works?

HomeworkHomework

Type out all definitions for Ch. 10Type out all definitions for Ch. 10 Complete 10.1 Reading Activity and Complete 10.1 Reading Activity and

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