BENEFITS  Improve production ratios  Increase world output IMPACT ON ECONOMY  Exports on prices & quantity  Imports on prices & quantity  Trade affects employment

ABSOLUTE ADVANTAGE  The ability of one trading nation to make a product more efficiently than another trading nation. COMPARATIVE ADVANTAGE  A nation will specialize in what it can produce at a lower opportunity cost than any other nation

TRADE AGREEMENT HOW DO THEY WORK? EUROPEAN UNIONBound both economically & politically (member surrender some sovereignty; monetary union (euro), common foreign policy NAFTALargest free-trade zone in the world; eliminated tariffs; phase-out of all trade barriers; increased protection for intellectual property & environmental protections OPECGroup of producers that regulate the production, pricing, and marketing of oil WTOHelp negotiate trade agreements; resolve disputes; monitor trading policies; provide support for developing countries

 The market value of all final goods & services produced within a nation’s borders in a given time period (often used annually) Measures 2 things at once: 1. Total income of everyone in the economy 2. Total expenditure on the economy’s output of goods

a. Products used in making other products b. Buying used goods c. They are charted in a yearly span d. Not produced in U.S. e. No way to measure out f. B/c they are illegal or avoid taxation

1. Consumption 2. Investment 3. Government spending 4. Net exports Formula: C+I+G+X=GDP

 Uses constant prices  Real GDP changes when there is a change in output

 Uses current prices  Nominal GDP changes when there is a change in output or price

 A series of periods of expanding and contracting economic activity  It is measured by increases and decreases in real GDP

 The expansion stage of the business cycle is a period of economic growth, or an increase in the GDP. Jobs are usually easy to find so unemployment goes down. More resources are needed to keep up with spending demand.

 The peak is the point at which GDP is the highest. As prices rise and resources tighten, businesses become less profitable.

 After the peak begins the recession phase. What happens?  Unemployment rises because employers produce less.

 A contraction lasting two or more quarters (six months or more)

 An extended period of high unemployment and limited business activity

 Stagnation in business activity and inflation of prices

 The final phase is trough. This is the point where both GDP and employment stop declining.  The cycle is done when: It has gone through all 4 phases

Nations with the highest standard of living Ex. US, Japan, Canada, Australia, New Zealand

Nations that have moved (or are moving) from a command economy to a market economy Ex. China, Russia, and a number of E. European countries

These countries have a lower GDP, less well developed industry, and a lower standard of living Ex. Many African, South American, & E. European countries

The basic support systems needed to keep an economy going including power, communications, transportation, water, sanitation, and education systems.

The Six Standards used by the United Nations to Determine the Level of Development for a Country

GDP per Capita – A nation’s overall GDP divided by population Ex. GDP of the US is over $40,000 (among the highest) GDP of Tanzania (E. Africa) is $700 (among the lowest) Which continent is the least developed? Which continents have no countries in the top per capita GDP?

HEALTH Infant Mortality Rate – the number of children who die within the first year of life per 1,000 live births Ex. Japan 3; Angola 185 (SW Africa) Life Expectancy – the average number of years a person could expect to live Ex. Japan 82; Angola 39 Developing nations and healthcare:

EDUCATION- Literacy Rate – the percentage of people over 15 that can read or write Ex. Japan – 99%; Somalia’s – 38% (NE Africa) Human Development Index (HDI) – combination of a nation’s real GDP per capita, life expectancy, adult literacy rate and student enrollment figures

ENERGY USE What does energy use say about a nation’s overall quality of life? The more energy used, the better the quality of life because the countries that use more energy are the manufacturing and service based nations.

CONSUMPTION OF GOODS AND SERVICES CONSUMPTION by Individuals

LABOR FORCE What kind of jobs do most of a nation’s workers find themselves employed? Mostly Agricultural jobs=LDC Manufacturing/Service-based=Developed Now turn to p. 550 in the textbook and read about Bostwana

Would you expect a positive or negative correlation between literacy rates and infant mortality rates? Explain. A negative correlation because as literacy rates go up, infant mortality rates would go down because there would be better medical care available.

ECONOMIC STRATEGIES:

EDUCATION CREATING A FULL CURRICULUM WHICH IS MANDATORY FOR ALL CHILDREN UP TO A CERTAIN AGE WILL INCREASE WHAT THE LABOR FORCE IS CAPABLE OF DOWN THE ROAD

BUSINESS INVESTMENTS ENCOURAGING FOREIGN COMPANIES TO INVEST IN A COUNTRY INCREASES THE LABOR FORCE NEEDED AND PUTS MORE MONEY INTO THE ECONOMY

BORROW FROM WORLD BANK THE WORLD BANK ALLOWS LDC’S TO BORROW FROM THEM AT A VERY LOW INTEREST AND WITH EXTRA TIME TO PAY BACK THE DEBT

BUILD INFRASTRUCTURE BUILDING ROADS, SCHOOLS, POWER STATIONS, BRIDGES INCREASE THE ABILITY OF THE COUNTRY TO SHIP GOODS AND PROVIDE SERVICES TO ITS PEOPLE AND ANY COMPANY INTERESTED IN DOING BUSINESS/INVESTING IN A COUNTRY

GOVERNMENT SPENDING THIS INCREASES THE AMOUNT OF CAPITAL IN CIRCULATION WHICH CAUSES AN INCREASE IN DEMAND; OFTEN RESULTING IN MORE JOBS

MICROLOANS SMALL LOANS, USUALLY UNDER $5,000 THAT AVERAGE PEOPLE LEND TO INDIVIDUALS IN LDC OR TRANSITIONING ECONOMIES SO THEY CAN GET THEIR BUSINESS OFF THE GROUND. THE PERSON GETTING THE LOAN PAYS IT BACK IN MONTHLY PAYMENTS AT A LOW INTEREST

IMF (International Monetary Fund) The International Monetary Fund (IMF) is an organization of 187 countries, working for global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world; countries pay into the IMF and can borrow money at low rates; IMF works for fair loans & loan terms for LDC’s.

UN Development Program UNDP is the United Nations' global development network, an organization advocating for change and connecting countries to knowledge, experience and resources to help people build a better life. They are on the ground in 177 countries, working with them on their own solutions to global and national development challenges. When faced with issues of globalization, countries turn to the UNDP to bring in experts to work with governments on problem-solving.

LDC Project

HOW DO LDC’s IMPACT THE GLOBAL ECONOMY? FOOD, FUEL, FINANCE IMPACTS ON DEVELOPING AND DEVELOPED COUNTRIES

A LOOK AT CENTRAL AFRICA REPUBLIC (CAR) STREET CHILDREN EVEN WITH DIAMOND MINING THE REBELS IN CAR A FAMILY IN CAR

WHAT ARE THE PROBLEMS FACED BY LDC’s? therefore… WHAT ARE THE IMPACTS OF LDC’s ON THE GLOBAL ECONOMY?