Chapter
10
Business in a
Global Economy
pp. 146-159
Chapter 10
Learning Objectives
After completing this chapter, you’ll be
able to:
1. Explain why nations need to trade with
each other.
2. Describe how currency exchange works.
continued
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Chapter 10
Learning Objectives
After completing this chapter, you’ll be
able to:
3. State the advantages of protectionism
and free trade.
4. Name types of trade barriers.
continued
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Chapter 10
Learning Objectives
After completing this chapter, you’ll be
able to:
5. Identify some of the major trade alliances
in the world today.
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Chapter 10
Why It’s Important
Global trade doesn’t just influence
business, it also affects all the
countries and people of the world.
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Chapter 10
Key Words
multinational company
imports
exports
exchange rate
balance of trade
protectionism
continued
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Chapter 10
Key Words
tariff
quota
embargo
free trade
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Chapter 10
Technology’s Influence
on Business
We are all part of the global
marketplace.
The global marketplace exists
anywhere business crosses national
borders.
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Chapter 10
Technology’s Influence
on Business
Countries can satisfy their citizens’
wants and needs by buying them in
the global market.
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Chapter 10
The Global Marketplace
A multinational corporation is a
company that does business in many
countries and has facilities and offices
in many countries around the world.
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Chapter 10
The Global Marketplace
The global marketplace works much
like a shopping mall or a supermarket.
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Chapter 10
The Global Marketplace
The United States is rich in resources—
human, natural, and production—but it
still needs things from other countries.
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Chapter 10
Figure
10.1
MAJOR EXPORTS AND IMPORTS OF THE UNITED STATES
Look at the graph
to see what
products the
United States
imports and
exports.
Source: Standard & Poor’s
Introduction to Business, Business in a Global Economy
Name the product
that the United
States exports
more than it
imports.
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Chapter 10
Specialization
Countries specialize in producing
certain goods and services.
By specializing, countries can sell
what they produce best so they can
buy the products they need from other
countries.
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Chapter 10
Specialization
The kinds of resources available to a
country often influence what it
specializes in producing.
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Chapter 10
Specialization
A country with little money or
advanced technology but a large
population might specialize in manual
labor.
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Chapter 10
Making an Ethical
Decision
1. What are the benefits and drawbacks of a
global economy for the United States?
2. What are the benefits and drawbacks of
globalization for people living in
underdeveloped countries?
continued
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Chapter 10
Making an Ethical
Decision
3. How can underdeveloped countries break
into world markets?
4. Should prosperous, industrialized nations
monitor labor issues in other countries? If
so, how? If not, who should monitor these
issues?
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Chapter 10
Types of Trade
Imports are goods and services that
one country buys from another
country.
Exports are goods and services that
one country sells to another country.
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Chapter 10
Types of Trade
Other types of trade include:
• Investment
• Exchange of human resources
• Tourism
• Military aid
• Loans
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Chapter 10
Currency
Countries have to pay for each other’s
products with currency. Currency is
another name for money.
Just as countries use different languages, they use different currencies,
such as dollars, pesos, and yen.
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Chapter 10
Currency
The foreign exchange market is made
up of banks where different currencies
are exchanged.
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Chapter 10
Exchange Rates
The exchange rate is the price at
which one currency can buy another
currency.
Exchange rates change from day to
day and from country to country.
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Chapter 10
Exchange Rates
How much the currency of a country is
worth depends on how many other
countries want to buy its products.
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Chapter 10
Prices
A company follows the change in
exchange rates to find the best prices
for products.
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Chapter 10
Prices
When the value of a country’s currency
goes up compared to another
country’s, it has a favorable exchange
rate.
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Chapter 10
Prices
When the value of a country’s currency
goes down compared to another
country’s, it has an unfavorable
exchange rate.
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Chapter 10
Prices
Some countries choose to lower the
value of their currency to bring in more
business.
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Chapter 10
Balance of Trade
Balance of trade is the difference in
the value between how much a
country imports and how much it
exports.
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Chapter 10
Balance of Trade
When a country exports more than it
imports, it has a trade surplus.
When a country imports more than it
exports, it has a trade deficit.
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Chapter 10
Balance of Trade
A country can have an unfavorable
balance of trade with one country and
a favorable balance with another.
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Graphic Organizer
Chapter 10
Graphic Organizer
How Exchange
Rates Affect the
Balance of Trade
Weak
Currency
Strong
Currency
More
exports
than
imports
Trade
surplus
(leftover
money)
FAVORABLE
BALANCE
OF
TRADE
More
imports
than
exports
Trade
deficit
(debt)
NEGATIVE
BALANCE
OF
TRADE
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Chapter 10
Fast Review
1. Give examples of how countries
specialize based on the types of
resources they have.
continued
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Chapter 10
Fast Review
2. Name types of trade between
countries other than imports and
exports.
3. Why would a country want to
devalue its currency?
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Chapter 10
Global Competition
Global competition often leads to trade
disputes between countries.
At the heart of most trade disputes is
whether there should be limits on
trade.
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Chapter 10
Protectionism
Protectionism is the practice of
putting limits on foreign trade to
protect businesses at home.
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Chapter 10
Protectionism
Some of the reasons in favor of
protectionism are:
• Foreign competition can lower the
demand for products made at home.
continued
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Chapter 10
Protectionism
• Companies at home need to be
•
protected from unfair foreign
competition.
Industries that make products related
to national defense need to be
protected.
continued
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Chapter 10
Protectionism
• 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, steel, or
grain.
continued
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Chapter 10
Protectionism
• Other countries might not have the
same environmental or human rights
standards.
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Chapter 10
Trade Barriers
To limit competition from other
countries, governments put up trade
barriers to keep foreign products out.
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Chapter 10
Trade Barriers
A tariff is a tax placed on imports to
increase their price in the domestic
market.
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Chapter 10
Trade Barriers
A quota is a limit placed on the
quantities of a product that can be
imported.
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Chapter 10
Trade Barriers
An embargo is when the government
decides to stop an import or export of
a product.
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Chapter 10
The Friendly Asian Markets
Many Asian markets are friendlier to smaller
American companies. Consultant Robert Azar
works with U.S. businesses that want to plant
roots in Asia.
continued
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Chapter 10
The Friendly Asian Markets
According to Azar, Asian businesses may
perceive a large company as a threat. In
contrast, they often see smaller ones as
someone they can join up with.
continued
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Chapter 10
Analyze
This is good news for what type of business
ownership?
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Chapter 10
Free Trade
Supporters of free trade believe there
should be no limits on trade.
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Chapter 10
Free Trade
The benefits of free trade are:
• It opens up new markets in other
•
countries.
It creates new jobs, especially in
areas related to global trade.
continued
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Chapter 10
Free Trade
• Competition forces businesses to be
more efficient and productive.
• Consumers have more choice in the
variety, price, and quality of products.
continued
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Chapter 10
Free Trade
• It promotes cultural understanding
and cooperation between countries.
• It helps all countries raise their
standard of living.
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Chapter 10
Trade Alliances
To reduce limits on trade more
countries are forming trade alliances
with each other.
In a trade alliance, several countries
merge their economies into one huge
market.
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Chapter 10
Trade Alliances
NAFTA (North American Free Trade
Agreement) was controversial
because some workers would be
displaced when trade barriers were
lowered.
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Chapter 10
Trade Alliances
Some of the major trade alliances in
the world today are:
• NAFTA
• European Union (EU)
• Association of Southeast Asian
Nations (ASEAN)
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Chapter 10
Figure
10.2
MAP OF TRADE ALLIANCES IN THE WORLD
The European Union (EU)
is the oldest and bestknown economic
community formed to
promote free trade among
the members of the
community and to foster
common economic
policies.
What nations make up the
European Union?
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Chapter 10
International Business and
Finance Affects Everyone
Understanding international business
and finance has become increasingly
important for the consumer, wage
earner, investor, citizen, and business
leader.
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Chapter 10
International Business and
Finance Affects Everyone
An understanding of international
business helps you understand why
goods and services are at particular
prices.
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Chapter 10
International Business and
Finance Affects Everyone
The business leader of tomorrow will
have a good grasp of international
business and finance.
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Chapter 10
Fast Review
1. What is a trade war?
2. What are some of the major trade
alliances in the world today?
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Chapter 10
Why do small companies seek to
do business globally?
continued
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Chapter 10
How does the cost of natural
resources affect the average
family?
continued
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Chapter 10
How do affordable, energy efficient
homes protect the environment?
continued
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Chapter 10
How can a small company
influence the economy of another
country?
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End of Chapter
10
Business in a Global Economy