Page 82 - Introduction to Business

56 PART 1 The Nature of Contemporary Business

production) and growth. As you can see, trade and exchange rate policy tools are
very potent in achieving economic policy goals.
In conclusion, countries have a wide range of economic policy tools that can be
used to achieve economic goals. Some of these policy tools may work against each
other. Hence the role of economic policymakers is to coordinate policies that rein-
force each other to arrive at the right goal. To revert back to our analogy, if your goal
is to get to Sydney, you will need to use the right combination of transportation
tools to get there as quickly and safely as you can.

reality How will you know whether the federal government is living beyond
CH ECK its means?

The Global Nature of Business

What is happening in China and India today illustrates how globalization is impact-
ing blue-collar and white-collar workers alike in wealthy countries such as the
United States, as low-skill factory jobs as well as high-skill service jobs migrate over-
seas. Business is becoming increasingly global in nature. What do we mean by that
statement? Businesses, big and small, depend to an extent on inputs of goods and
services from abroad. This is true not only in the United States but also in most for-
eign countries, especially those that do not follow the command economic system.
When you visit Wal-Mart or any retail store close by and check a product’s label, you
will find out where the product is manufactured. You will notice that quite a few
products that you often purchase are manufactured or assembled in different parts
of the world. Even some of the vegetables displayed in your grocery store have been
harvested with the help of foreign labor, not to speak of the Australian, Chilean,
French, German, and Italian wines that you often see on your grocery or liquor store
shelf. Since some 60 percent of crude oil consumed in the United States comes from
abroad, it is highly likely that the gasoline that you buy to fill your car’s gas tank is of
foreign origin. For that matter, even your car is probably of international origin.
Since the mid-1990s, the service sector in the United States has become increasingly
global as U.S. companies accelerated their offshore outsourcing strategy to remain
competitive. For example, some of the telemarketing calls you receive (typically dur-
ing dinner time!) regarding getting credit cards or switching to different long-dis-
tance telephone carriers originate from call centers of U.S. companies located in
India or the Philippines. Furthermore, as U.S. and European companies have grown
more familiar with the expertise of their Indian outsourcing partners, they have
increased the complexity of the work (such as software development, supply chain
management, and company or stock analysis) that they are willing to hand over to
them. Most businesses that you interact with on a daily basis are directly or indi-
rectly associated with their international counterparts.

Why Do Countries Trade or Invest Overseas?
international trade The import or export
of goods or services from or to other
countries by individuals, firms, or gov- LEARNING OBJECTIVE 3
ernments Explain why trade is better than no trade for society as a whole.
imports Goods or services that are
purchased from abroad International trade occurs when individuals, firms, or governments import or
export goods or services. Imports are goods or services that are purchased from
exports Goods or services that are sold
to citizens abroad abroad (outside national boundaries). Similarly, exports are goods or services that

Copyright 2010 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.