1. Mr. Elsesser
Introduction to Business

2. This unit will allow us to explore:
 Why the world has become a global economy.
 Why people and countries specialize in producing
goods and services.
 The concept of “free trade.”
 Who benefits and who does not benefit from free
trade.

3. Answer this question…
“What does the term
GLOBAL ECONOMY
mean to you?”

4.  A Global Economy is:
 The interconnected economies of the nations of
the world.
 Fueled by TRADE:
 Specific area of business or industry, skilled
occupation, or the people who work in a specific
area of business or industry
 International Trade:
 The exchange of goods and services between
nations.

5.  Economies that are developed are
GLOBALIZED by…
 Multinational Corporations:
 a company that does business in many
countries and has facilities and offices around
the world
 Can you identify a multinational
corporations?

7.  Domestic Trade:
 The production, purchase, and sale of
goods/services within home country.
 World Trade:
 The exchange of goods and services across
international boundaries.
 Imports:
 Goods and services that one country buys from
another country
 Exports:
 Goods and services that one country sells to another
country

8. Balance of Trade:
 The difference in value between a country’s
imports and exports over a period of time.
 Trade Surplus:
 A country exports more than it imports.
 Trade Deficit:
 A country imports more than it exports.
 Is it better to have a surplus or deficit?

9. Trade Specialization:
 Countries that focus on particular activities,
areas or product.
 Builds and sustains a market economy.
 Comparative Advantage:
 The ability of a country/company to produce a
particular good more effectively than another.
 Top 10 Countries with a U.S. Trade Deficit
 Top 10 Countries with a U.S. Trade Surplus

10. Businesses must convert their money
into that nation’s currency ($).
 Exchange Rate:
 The price at which one currency can buy
another currency. Changes daily.
 Countries follow rates
to find best prices for
products.

11. 1. What is the global economy?
1. The interconnected economies of the nations of
the world.
2. What is the difference between domestic trade
and international trade?
1. Domestic trade is between parties within a
country and international trade is between parties
in different countries.
3. Why would a country want its currency its
appreciate?
1. So citizens can buy more goods and services in
other countries.

12. Why might a country
impose limits or
restrictions on its
own trading polices?

13.  Competition often leads to disputes, therefore
trade policies may differ among countries.
Protectionism:
 The practice of government putting limits on
foreign trade to protect businesses at home.
 Examples: Tariffs, quotas, embargos

14.  Tariff:
 A trade barrier where tax is placed on imports to
increase price in domestic markets.
 Quota:
 A trade barrier where limits are placed on
quantities of products that can be imported.
 Examples of U.S. Tariff/Quota Commodities
 Embargo:
 A political or military trade barrier that bans the
importing/exporting of products.
 Example: U.S. can not import Cuban products,
cannot export military products.

15.  Foreign competition can lower demand for
products made at home.
 Protect home companies from unfair competition.
 Protect products related to national defense.
 Foreign cheap labor can lower wages/threaten
jobs.
 Countries can become too dependent on others for
important products.
 Other countries may not have the same
environmental or human rights standards.

16.  Some countries think no trade restrictions should
exist throughout our globalized economy.
Free Trade:
 Few or no limits on trade between countries.
 Led to the establishment of trade alliances
 North American Free Trade Agreement (NAFTA)
 European Union (EU)
 Association of Southeast Asian Nations (ASEAN)

17.  Opens new markets in other countries.
 Creates new jobs.
 Competition forces business to be more
productive/efficient.
 Consumers have more choices in products.
 Promotes cultural understanding/cooperation
among countries.
 Helps countries raise their standard of living.

18. 1. Give 3 reasons for protectionism.
1. Protects businesses from unfair competition, from
countries that violate U.S. human rights or
environmental standards, and from
overdependence on another country’s products.
2. Give 3 reasons for free trade.
1. encourages competition, gives consumers more
choices for products, promotes cultural
understanding
3. Define some of the world’s major trade alliances.
1. NAFTA, the EU and ASEAN