1. Economics and the World Economy
GLOBAL MARKETING
Economics and the World Economy

2. Understanding the World Economy
Productivity is OUTPUT per worker HOUR
Gross National Product (GNP) – Total dollar value of goods and services produced by a nation, including goods/services produced ABROAD by U.S. citizens and companies
Gross Domestic Product (GDP) – is the output of goods and services produced by labor and property located within a country
Difference between GNP and GDP –GNP counts the country RESPONSIBLE for production. In GDP, counts the country WHERE the production takes place

3. Measuring Inflation
Inflation refers to RISING prices (low – 1% %; high – 10% or higher; money does not have the same value)
Consumer Price Index (CPI) – measures the change in price over time of 400 specific household goods and services (milk, cars, medical care, etc.)
Producer Price Index (PPI) – measures wholesale price levels in the economy
(business to business costs- steel, etc.)

4. Why Trade Internationally?
Countries trade with others to get RESOURCES that they NEED and do not have
4 Benefits of International Trade:
Increased competition
Lower prices
More variety
Exchange of ideas and technological advancements

5. Why Trade Internationally?
Interdependence of Nations:
Most countries do not produce or manufacture all the goods and services they NEED
Countries get some of their goods and services from OTHER nations because each country possesses UNIQUE resources and capabilities
“The global marketplace is here to stay”

6. International Trade The sale of products and services to
people in other countries – international trade
CHINA is the world’s TOP importer and exporter of goods
China’s total trading of goods in 2015 $2.165,205 trillion
America’s total trading of goods in 2015 $1,373,192 trillion
International trade INCREASES each year

7. Imports Products or services PURCHASED from ANOTHER country - IMPORTS
U.S. IMPORTS include: electronics, machines, autos, oil, pharmaceutical, medical equipment
Many imports from Canada, China, Mexico and Japan

9. Exports
Products that are produced in YOUR country and other countries purchase them - EXPORTS
Products are SOLD in another country
The U.S. EXPORTS - machines, electronic equipment, aircraft/spacecraft, autos, oil

11. Exporter

12. Balance of Trade
Difference between what a country imports and exports – BALANCE OF TRADE
If NEGATIVE, the country is spending MORE on IMPORTS than they are making on exports
If it is POSITIVE, the country is spending less on imports and they are making MORE on EXPORTA

13. Balance of Trade
The U.S. exports LESS amount and imports MORE; therefore, we have a balance of trade
NEGATIVE

14. Government Control of International Trade
Not everyone benefits from Free Trade
Because there are both winners and losers of free trade, sometimes governments decide to IMPOSE trade BARRIERS or RESTRICTIONS of free trade

15. Government Control of International Trade (continued)
TARIFF, also called a DUTY, a TAX on imports
QUOTA either:
Limits the QUANTITY allowed to be imported
Limits the DOLLAR VALUE of a product imported
An EMBARGO is a TOTAL BAN on specific goods coming into and out of a country

16. 3 Types of International Markets
WHITE MARKET: The import and sales of goods by authorized dealers; receive customer support from the legitimate importer
GRAY MARKET: The import and sale of goods by unauthorized dealers; such activity is unofficial but NOT illegal
Goods have NO factory warranty, and receive NO customer support from the legitimate importer
BLACK MARKET: The import and sale of goods that are strictly CONTROLLED or ILLEGAL
Motives are to trade contraband, avoid taxes and regulations, or skirt price controls or quotas

17. Well-Known Trade Agreements/Alliances
European Union (EU)
World Trade Organization (WTO)
North American Free Trade Agreement (NAFTA)

18. The European Union (EU)
Europe’s trading bloc
Free trade among its 28 member nations
Created SINGLE European currency (euro) and CENTRAL Bank
Replaced national currencies (French/franc and German/mark)

19. The World Trade Organization (WTO)
Global coalition of nations that make rules governing INTERNATIONAL trade
Police agreements and resolve disputes among nations
154 member nations

20. North American Free Trade Agreement (NAFTA)
Free trade agreement between 3 members: U.S., Canada, and Mexico
Principal benefit is INCREASED trade with Mexico
NAFTA’s main goal was to REMOVE all trade BARRIERS and investment restrictions among the 3 countries