2. Read to Learn
Explain why the world has become a global economy.
Explain why people and countries specialize in producing goods and services.

3. 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.

4. We live in a global economy fueled by international trade.
The Global Economy
We live in a global economy fueled by international trade.
The development of the global economy is called globalization.
global economy
the interconnected economies of the nations of the world
international trade
the exchange of goods and services between nations

5. Sony is an example of a multinational corporation.
The Global Economy
Sony is an example of a multinational corporation.
multinational corporation
a company that does business in many countries and has facilities and offices around the world

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

7. International Trade
Trade allows countries to meet their individual wants and needs as well as to help their own economies.
trade
a specific area of business or industry, a skilled occupation, or the people who work in a specific area of business or industry

8. 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.

9. One country’s imports are another country’s exports.
Imports and Exports
One country’s imports are another country’s exports.
imports
goods and services that one country buys from another country
exports
goods and services that one country sells to another country

10. Major Imports and Exports of the United States
Figure 10.1

11. The United States has a favorable balance of trade with Australia.
the difference in value between a country’s imports and exports over a period of time

12. Trade Surplus Trade Deficit A country exports more than it imports
A country imports more than it exports

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

14. 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.

15. International Trade

16. Using Resources to Specialize
Countries that specialize may have a comparative advantage.
comparative advantage
the ability of a country or company to produce a particular good more effectively than another country or company

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

18. Currency
The exchange rate for currencies changes from day to day and from country to country.
exchange rate
the price at which one currency can buy another currency

19. 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.