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Read to Learn

• Explain why the world has become a global economy.

• Explain why people and countries specialize in producing goods and services.

The Main Idea

International trade has increased because more countries specialize and offer their goods and services to other countries. Also, the value of one nation’s currency in relation to other currencies affects what it buys and sells to other nations.

Key Concepts

• The Global Economy• International Trade

Key Term

globaleconomy

internationaltrade

the interconnected economies of the nations of the world

the exchange of goods and services between nations

Key Term

multinationalcorporation

trade

a company that does business in many countries and has facilities and offices around the world

a specific area of business or industry, a skilled occupation, or the people who work in a specific area of business or industry

Key Term

imports

exports

goods and services that one country buys from another country

goods and services that one country sells to another country

Key Term

balance oftrade

comparativeadvantage

the difference in value between a country’s imports and exports over a period of time

the ability of a country or company to produce a particular good more efficiently than another country or company

Key Term

exchangerate

the price at which one currency can buy another currency

The Global Economy

We live in a global economy fueled by international trade.The development of the global economy is called globalization.

global economythe interconnected economies of the nations of the world

international tradethe exchange of goods and services between nations

The Global Economy

Sony is an example of a multinational corporation.

multinational corporationa company that does business in many countries and has facilities and offices around the world

International Trade

Trade allows countries to meet their individual wants and needs as well as to help their own economies.

tradea specific area of business or industry, a skilled occupation, or the people who work in a specific area of business or industry

Multinationals

The top multinational companies include Sony, Coca-Cola, Toyota, and Nike.

Figure 10.1Major Imports and Exports of the United States

Managing and Leading Others

• Leaders know their business.• Leaders know the capabilities of their

employees.• Leaders can analyze current trends.• Leaders have vision and can inspire others.• Leaders help a company run smoothly.

Managing and Leading Others

Some people who are managers are not leaders.They may focus on specific tasks to make sure work gets done, but they may not be visionaries or inspire others.

Quiet Leadership

On December 1, 1955, Rosa Parks, an African American seamstress, was ordered to give her bus seat to a white male passenger in Montgomery Alabama. Her refusal and subsequent arrest sparked the civil rights movement.

Types of Trade

• Domestic trade is the production, purchase, and sale of goods and services within a country.

• World trade is the exchange of goods and services across international boundaries.

Imports and Exports

One country’s imports are another countries exports.

importsgoods and services that one country buys from another country

exportsgoods and services that one country sells to another country

Balance of Trade

The United States has a favorable balance of trade with Australia.

balance of tradethe difference in value between a country’s imports and exports over a period of time

Graphic Organizer

Trade Surplus

A country exports more that it imports

Trade Deficit

A country imports more that it exports

Specialization

To specialize means to focus on a particular activity, area, or product.Specialization builds and sustains a market economy.

Using Resources to Specialize

Countries can specialize and trade some of the items that they produce in order to obtain other countries’ goods and services.

Using Resources to Specialize

Countries that specialize may have a comparative advantage.

comparative advantagethe ability of a country or company to produce a particular good more effectively than another country or company

Currency

To trade with another country, businesses must convert their money into that nation’s currency.Currency is exchanged on the foreign exchange market.

World Currencies

Several countries have the same currencies or use the same currencies.

Currency

The exchange rate for currencies changes from day to day and from country to country.

exchange ratethe price at which one currency can buy another currency

Currency

Companies follow the exchange rates to find the best prices for products.A country with an appreciated exchange rate can buy more of another country’s products.

1. What is the global economy?

The global economy is the interconnected economies of the nations of the world.

1. What is the difference between domestic trade and international trade?

Domestic trade is between parties within a country. International trade is between parties in different countries.

1. Why would a country want its currency to appreciate?

A country might want its currency to appreciate so that citizens can buy more goods and services in other countries.

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