The Main Idea – Chapter 7 This chapter discusses how business is conducted internationally. 7.1 discusses the trading of goods and services between countries and how governments protect their producers 7.2 describes the growing economic interdependence among countries

Objectives: -Describe how the concepts of absolute and comparative advantage determine what countries produce. -Explain why businesses export and import -Discuss how foreign exchange rates affect imports and exports

Quick! Get a piece of paper In one minute… Write as many foreign countries as you can

Domestic vs International Business What is domestic business? It is the making, buying, and selling of goods and services within a country What is international business? Business activities needed for creating, shipping, and selling goods and services across national borders.

Who can guess how many countries the US trades with?

Class exercise Go to Research and discover at least three jobs that deal with international business On a piece of paper, list the three jobs and tell me: 1. Summarize the nature of the work 2. What the job outlook is 3. Summarize what the earnings (hourly wage or salary) are for the position. 4. Put in bin when finished.

International Trade What is the main reason for international trade? What impact does it have on the US economy?

International trade The exchange of goods and services by different countries. Most of the world today depends on international trade to maintain its standard of living.

Absolute and Comparative Advantage Absolute Advantage- Exists when a country can produce a good/service at a lower cost than other countries. Examples – South America has AA with coffee production and Saudi Arabia has AA in oil production. What do we have an AA in?

Absolute advantage The ability to produce more of a good than another producer. The US has an absolute advantage in: grains, automobiles, metals including aluminum and copper, electrical and telecommunications equipment and food.

Absolute and Comparative Advantage Comparative Advantage- A situation in which a country specializes in the production of a good/service at which it is relatively more efficient at producing Example - A 7’ tall rabbi and a 5’ tall priest walk into a strawberry field lined with apple trees. They must harvest both crops before they can meet their maker. Who picks what?

The law of comparative advantage Comparative advantage Producers should produce the goods they are most efficient at producing and purchase from others the goods they are less efficient at producing. Individuals, companies, and countries should specialize in what they do best.

Exporting and Importing What’s the difference? Who is the largest exporting country in the world? –No. Not China. Its us, the US! $700B goods/services a year. Who is the largest importing country? Yep! The US – about $900B

Exporting exports Goods and services sold to other countries *1 of every 6 jobs in the US depends on international business! Some things the US exports: Factory/farm machinery, food, agricultural products, chemicals, fertilizers, medicines, plastics, movies, tv shows, books, magazines.

Exporting Why would a company want to export products? Diversification- engaging in a variety of operations.

Importing Imports Goods and services purchased abroad Did you know that bananas, cocoa, spices, tea, silk and crude rubber are 100% imported from other countries?

Imports (cont’d) The US buys about % of: Crude oil Fish Carpets Sugar Leather gloves Dishes Sewing machines

On a piece of paper… Please list the top ten imports and exports of the US and list the monetary value of each.

Which country has the largest trade imbalance with the US? (From U.S) (Into U.S)