The U.S. and the Global Economy

The United States functions within a global marketplace, where goods and services are traded and sold. Here are some characteristics of the global economy:

•Worldwide markets ~ countries all over the world trade daily with one another

•All nations buy and sell goods ~ every country on earth needs to trade to survive

•Countries specialize in the production of particular goods and services ~certain products can only be produced in certain places (for instance, coffee can only be grown in certain climates), so countries specialize in the kinds of goods they offer

•Technological advances allow money and information to transfer easily around the world ~

high speed trading is possible because of computers and the flow of information

•Nations trade internationally to increase their wealth and the value of their money ~the more wealth and success a country has in trading, the more its currency is worth to other countries

What are the benefits and costs of international trade?

Trading with other countries can be very beneficial because it:•Allows countries to obtain a wide variety of goods and services that they might not produce efficiently ~some countries might not produce certain items very well or at all;

•Allows countries to buy different goods and services from other countries ~this allows consumers access to new products and ideas;

•Allows countries to sell their products and services to other countries~ this opens up new opportunities for profit;

•New technological advances shared around the world can lower the costs of production…~which means we can now produce the same product more inexpensively than before;

•Specialization promotes economic growth and efficiency ~

countries that specialize can focus on certain goods and supply that specialty to the world.

Trade with other countries can, however, also put countries at a disadvantage because:

•Trading with other countries leads to more competition ~more competition can make it more difficult to sell your product;

•Competition with other countries can lower the price of your country’s goods and services~lower prices means we won’t get a high price for our products when we sell;

•Companies can be relocated to another country where production is cheaper ~

when production gets moved to other countries, people at home lose their jobs.