Download Business in the Global Economy

BUSINESS IN THE GLOBAL ECONOMY
BUSINESS PRINCIPLES A
MRS. SORRELL
3.1 INTERNATIONAL BUSINESS BASICS
 3.1.1—Trade Among Nations
 Domestic business
 International business, aka foreign or world trade
 Absolute Advantage
 A country can produce a good or service at a lower cost than other countries
 Comparative advantage
 A country specializes in the production of goods or services because of efficiency
 Imports
 Exports
REVIEW 3.1.1
 What are some advantages and disadvantages of
international trade?
 Looking at Figure 3-1, how would US
manufacturing be affected if these imports were
not available?
MEASURING TRADE RELATIONS
 Foreign debt—owed to other countries
 Balance of trade
 Exports > imports = trade surplus
 Favorable trade position
 Imports > exports = trade deficit
 Unfavorable trade position
 Country can have a trade surplus with one country and trade
deficit with another
MEASURING TRADE RELATIONS, CON’T.
 Balance of payments—difference between the amount of money coming into
a country and the amount that goes out
 Positive or favorable
 Negative or unfavorable
 Money passes from one country to another through investments and tourism
 Citizens may invest in foreign countries
 Businesses may invest in a factory in another country
 One government might give financial assistance or military aid to another
country
 Tourists’ travel adds to the flow of money from their country to the country
they are visiting
REVIEW 3.1.2
 Looking at Figure 3-3, why is it better for a country to
export more than it imports?
 How does balance of trade differ from balance of
payments?
INTERNATIONAL CURRENCY
 3.1.3—Money
 Three functions
 Store of value
 Medium of exchange
 Unit of measure
 Foreign exchange market—banks that buy and sell different currencies
 Exchange rate—value of currency in one country compared with the
value of currency in another
 Fees charged by currency exchange operators
FACTORS AFFECTING CURRENCY VALUES
 Balance of Payments
 Favorable = constant or rising currency value
 Increased demand for products and currency influence this situation
 Economic conditions
 Inflation reduces buying power
 Interest rates
 Political Stability
 Sudden changes in government may create an unfriendly setting for foreign business
 Risk of losing buildings, equipment or money in foreign banks
 Laws that impact foreign businesses in a country reduces confidence in that country’s currency
REVIEW
 Using Figure 3-4, which currency is worth the most in terms of
US dollars?
 Work with a partner to develop a list of actions to improve a
nation’s trade relations. Think of actions that might be taken by
businesses, government, workers, consumers, schools, and
others.
 Complete Review 3.1 on Mindtap