GLOBAL ECONOMY

The Global Economy Overview

  • Focuses on how countries make economic choices.

  • Countries require budgets and face expenses similar to individuals.

  • Tax collection is essential for funding expenses.

  • Addressing scarcity is a common economic problem for nations.

Basic Economic Questions for Countries

  • What goods will be produced?

  • How will those goods be produced?

  • Who will get the goods?

Requirements for Economic Growth

  1. Natural Resources: land, water, raw materials

  2. Capital Resources: money, tools, factories, technology

  3. Human Resources: labor force, entrepreneurs

  4. Distribution: logistics for moving goods (trucks, trains, etc.)

  5. Consumers: people ready and willing to buy goods/services

Developed vs. Developing Countries

  • Developed Countries: Strong economies (e.g., U.S., Canada, Germany); high GDP and per capita income.

  • Developing Countries: Weaker economies (e.g., Haiti, Sudan); low GDP and per capita income.

Understanding GDP

  • GDP (Gross Domestic Product): Total value of everything produced in a country within a year.

  • Indicates overall economic health based on production and sales.

Foreign Exchange Rate

  • Currency represents money in a country (e.g., U.S. Dollar).

  • Currency value fluctuates based on economic strength.

  • Important for transactions when traveling internationally.

Global Interdependence

  • Natural resources availability depends on geography and climate.

  • Countries rely on each other for resource needs.

  • Exports: Resources sent to other countries.

  • Imports: Resources brought from other countries.

  • Trade: Exchange of resources between countries.

Economic Relationships

  • Tariff: Tax on imported goods.

  • Embargo: Ban on trade with specific countries (e.g., U.S. and Cuba).

  • Consumers may boycott businesses based on ethical concerns.

Types of Economic Systems

  1. Traditional Economy: Based on customs and uses barter.

  2. Command Economy: Central authority controls economic decisions (e.g., communism).

  3. Market Economy: Private businesses control based on supply and demand (e.g., U.S., Australia).

  4. Mixed Economy: Combination of market and command systems; some government regulation.

The U.S. Economy

  • Primarily a market economy, categorized as a mixed economy due to government regulation.

  • Addresses the three basic economic questions through price determination influenced by supply and demand.

  • Consumer choices signal value to producers.

Economic Cycle Involvement

  • Households, Businesses, Government: Each plays a role in supporting the economic cycle through interactions and support.

Types of Economic Industries

  • Examples include Aerospace, Agriculture, Automobile, Construction, Defense, Education, Energy, Entertainment, Finance, Healthcare, Retail, Technology, and Travel.

  • Interdependence between various industries to meet consumer needs.