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UNIT 10We Are Part of the Global Economy (9 days)

UNIT 10 – WE ARE PART OF THE GLOBAL ECONOMY (9Days)All teaching resources in this document are free for teachers. Here is how to you accessthem:1. Many are hyperlinked in the document, so you can get started right away. 2. Lessons that do not have a hyperlink can be found on the lesson plan resourcecalled Virtual Economics 4.5 or 5.0 (VE). All teachers can and should get thisresource for free by participating in a VCEE training session. Visit www.vcee.orgfor more information.3. Lessons from Financial Fitness for Life are on VE. They also have educationaltechnology tools that can be found here:https://www.econedlink.org/resources/collection/fffl-9-12/As globalization increases and nations’ economies grow more integrated, there are costsand benefits. For example, we know when people trade willingly (voluntarily), both arebetter off. We know that trade allows people and regions to do what they do best andtrade for the rest. And this increases global output of goods and services. Trade also givesconsumers greater variety in what they consume. In the US for example, without trade wewould have to give up coffee, chocolate, many spices--not to mention imported oil.Globalization creates competition which lowers prices which is good for consumers. Atthe same time, US producers may be forced out of business because they cannot produceat those lower prices (e.g. few shoes, textiles, televisions are produced in the U.S. today.)Greater connectivity through the Internet and otherwise allows businesses to hire skilledpeople in other countries to do work at lower wages. This lowers costs of production forbusinesses and can lead to lower prices for consumers. However, it creates morecompetition for U.S. jobs. U.S. students entering the workforce will be competing withthose foreign workers as well as other U.S. workers. Thus U.S. students, to becompetitive, must invest in their human capital. There will be few jobs for theunskilled--and those will offer very low pay.With greater integration of nations, what happens in one affects others. When the U.S.economy slows, fewer imports are purchased from other countries and their economiesslow as well. If a country defaults on its debts, other countries will be affected becauseforeign banks and individuals will have made loans to that country.Globalization has brought change--both costs and benefits. It has created some new jobsand destroyed others. Students entering the workforce will be better prepared if theyunderstand the nature of the global economy.EPF.9 The student will demonstrate knowledge of the global economy bya) explaining that when parties trade voluntarily, all benefit.1Virginia Council on Economic Education

Day 1 Why do people trade?EPF.9 The student will demonstrate knowledge of the global economy byb) distinguishing between absolute advantage and comparative advantage.Day 1 Do you have an absolute or comparative advantage?EPF.9 The student will demonstrate knowledge of the global economy byc) distinguishing between trade deficit and trade surplus.Day 1 What’s the difference between a trade deficit and a trade surplus?EPF.9 The student will demonstrate knowledge of the global economy byd) explaining exchange rates, and the impact of a strong dollar and weak dollar oneconomic decisions.Days 1 and 2 Changing exchange rates: who is helped and who is hurt when thedollar strengthens or weakens?EPF.9 The student will demonstrate knowledge of the global economy bye) describing the costs and benefits of trade barriers.Day 1 Who is helped and who is hurt by trade barriers?EPF.9 The student will demonstrate knowledge of the global economy byf) describing the effects of international trade agreements and the World TradeOrganization.Day 1 How do trade agreements increase trade?EPF.9 The student will demonstrate knowledge of the global economy byg) explaining growing economic interdependence.Day 1 How does globalization make countries more interdependent?Evaluation Day2Virginia Council on Economic Education

EPF.9 The student will demonstrate knowledge of the global economy bya) explaining that when parties trade voluntarily, all benefit.Day 1 - Why do people trade?Content KnowledgeVoluntary exchange occurs only when all participating parties expect to gain. This is truefor trade among individuals or organizations within a nation, and among individuals ororganizations in different nations. Students will be able to use this knowledge tonegotiate exchanges and identify the gains to themselves and others.As a result of their competitive experiences in sports and games, students usually havelearned to expect that, in most contests when one person or team wins, another person or teammust lose. Voluntary exchanges, on the other hand, are cooperative activities in which bothsides expect to gain, and both usually do. Because all of the parties to a voluntary exchangeexpect to gain from trade, institutions that make trading easier usually improve social welfare.Understanding the win-win nature of voluntary exchange helps students learn that people andorganizations trade with one another only when each party oers something that the otherparty values more than whatever he or she has to trade. For example, an employer will hire astudent at a wage rate of $8 per hour only if the employer expects to receive labor services fromthe student that are worth at least that much. And the student will voluntarily work for $8 perhour only if the student values the $8 more than the best alternative use of his or her time. Theprinciple that voluntary trade can improve each participant’s situation applies to all voluntaryexchanges, including trade between people or organizations in dierent parts of the samecountry, or among people or organizations in dierent countries.2VocabularyGains from trade – The increased output resulting from trade; with trade, eachindividual, region or nation is able to concentrate on producing goods and services that itproduces efficiently, while trading to obtain goods and services that it does not produceVoluntary exchange - Trading goods and services with other people because both partiesexpect to benefit from the tradeVirginia Board of Education FrameworkVoluntary exchange occurs only when all participating parties expect to gain. This is truefor trade among individuals or organizations within a nation and among individuals ororganizations in different nations.What does it mean to trade voluntarily?3Virginia Council on Economic Education

When people trade voluntarily, that is, willingly and without coercion, both partiesbenefit.What are some of the benefits of trade?Voluntary exchange among people or organizations in different countries gives people abroader range of choices in buying goods and services and often lowers prices.Teaching Tips1) Explain that voluntary exchange among people or organizations gives people a broaderrange of choices in buying goods and services. Discuss how students’ daily lives wouldbe different if people in the United States did not trade with people in other countries.2) Conduct a trading activity to show students that both parties benefit when people tradevoluntarily. Be sure to do “The Magic of Markets,” which is a classic lesson, and easy touse. (Online variants are in development. Reach out to Stephen Day (shday@vcu.edu)with any questions about access to these.)Lessons and ResourcesFoundation for Teaching Economics Lesson: “The Magic of Markets.”https://www.fte.org/teachers/teacher-resources/lesson-plans/rslessons/the-magic-of-markets-trade-creates-wealth/Capstone Unit 7, Lesson 40: Why Do People Trade Across National Borders?Focus: Globalization Lesson 2: Why People Trade, Domestically and InternationallyEd Tech:Econedlink video and Kahoot: Benefits of Trade Video and Quizhttps://www.econedlink.org/resources/benefits-of-trade-comparative-advantage-video-and-quiz/4Virginia Council on Economic Education

EPF.9 The student will demonstrate knowledge of the global economy byb) distinguishing between absolute advantage and comparative advantage.Day 1 - Do you have an absolute or comparative advantage?Content KnowledgeIndividuals and nations have a comparative advantage in the production of goods orservices if they can produce a product at a lower opportunity cost than other individualsor nations.VocabularyAbsolute advantage - The ability to produce more units of a good or service than someother producer, using the same quantity of resources.Comparative advantage - The ability to produce a good or service at a loweropportunity cost than some other producer. This is the economic basis for specializationand trade.Specialization - A situation in which people produce a narrower range of goods andservices than they consume. Specialization increases productivity; it also requires tradeand increases interdependence.Opportunity cost - The second-best alternative (or the value of that alternative) thatmust be given up when scarce resources are used for one purpose instead of another.Transaction costs - Costs associated with buying or selling goods and services that arenot included in the money prices of those goods and services. Examples include obtaininginformation on prices and product quality, searching for sellers, and bargaining costs.Virginia Board of Education FrameworkAn individual, business, or country that can produce a certain good with fewer resourcesthan other countries is said to have an absolute advantage.An individual, business, or country that can produce a certain good at a lower opportunitycost than its trading partners is said to have a comparative advantage.Specialization occurs when an individual, business, or country focuses its resources onproducing a few goods or services and expects to trade for other goods and services itwants.Total world production is greater when nations specialize in the production of thoseproducts that they can produce most efficiently.Teaching Tips5Virginia Council on Economic Education

1) Questions students should be able to answer at the end of this lesson: What is thedifference between absolute advantage and comparative advantage? What isspecialization and how is it related to trade and total output? What is the primaryunderlying factor driving international trade? When nations trade based on comparativeadvantage, how are total production and consumption affected?2) Should the person who is best at a task always be the one to do it? For example, if alawyer is better at representing clients and better at typing than her secretary, should shedo both tasks?3) Explain when trading the person with the comparative advantage is the one whoshould do each task. That will be the one with the lowest opportunity cost. Practiceproblems determining who has the comparative advantage in various situations.4) Be sure that students understand the difference between absolute advantage andcomparative advantage.5) Explain that this is important because when people, businesses or countries specializein the goods or services where they have a comparative advantage, total output increases.6) Have students apply the concepts of opportunity cost and comparativeadvantage to the following problem: The Netherlands can produce in one day either fourdrill presses or eight embroidered tablecloths. Using the same amount of resources,Portugal can produce either two drill presses or seven embroidered tablecloths. Whichcountry should specialize in producing drill presses and import tablecloths and why?Which country should specialize in producing table cloths and import drill presses, andwhy?27) International trade stems mainly from factors that confer comparative advantage,including international differences in the availability of productive resources anddifferences in relative prices. Name three things, such as bananas, coffee andEucalyptus oil, that could be produced in the continental United States, althoughproduction would be very costly. Explain in terms of opportunity costs why the UnitedStates is probably better off importing such goods.28) Transaction costs are costs (not to be confused with the price of the good or service)that are associated with the purchase of a good or service, such as the cost of locatingbuyers or sellers, negotiating the terms of an exchange, and insuring that the exchangeoccurs on the agreed upon terms. When transaction costs decrease, trade increases. Havestudents identify transaction costs associated with the purchase of a good or service.Also, discuss why each of the following encourages more efficient exchange: (1) trucksthat can carry larger loads for the same fuel costs; (2) automated teller machines; and (3)credit cards.26Virginia Council on Economic Education

9) The goods or services that an individual, region, or nation can produce at lowestopportunity cost depend on many factors (which may vary over time), includingavailable resources, technology, and political and economic institutions. Have studentsuse their understanding of available resources, technology, and political and economicinstitutions in the U.S. and other countries, to explain why the U.S. no longer has acomparative advantage in the production of shoes.210) Like trade among individuals within one country, international trade promotesspecialization and division of labor and increases the productivity of labor, output andconsumption. Have students explain how the process of specialization and division oflabor results in increased productivity of labor, output, and overall consumption.211) These are challenging concepts. It will be helpful to provide practice by using alesson such as the Economics in Action lesson listed below.Lessons and ResourcesCapstone Unit 7, Lesson 41: Why People Trade: Comparative AdvantageEconomics in Action Lesson 13: Comparative Advantage and Trade in a GlobalEconomyFocus: Globalization Lesson 3: Finding a Comparative Advantage Including Your OwnEconedlink Lesson. Should Lebron James Mow His Own Lawn?https://www.econedlink.org/resources/should-lebron-james-mow-his-own-lawn/VideosThe Terminal – DVD (Chapter 10 – 3 minutes)http://www.youtube.com/watch?v=38hvvAzgXZY (absolute and comparative advantage)Khan academy on comparative advantage and absolute advantagehttp://www.khanacademy.org/video/comparative-advantage-and-absolute-advantage?playlist=MicroeconomicsKhan academy on specialization, comparative advantage and gains from tradehttp://www.khanacademy.org/video/comparative-advantage-specialization-and-gains-from-trade?playlist=Microeconomics7Virginia Council on Economic Education

EPF.9 The student will demonstrate knowledge of the global economy byc) distinguishing between trade deficit and trade surplus.Day 1 - What’s the difference between a trade deficit and atrade surplus?Content KnowledgeNet exports equal the value of exports (goods and services sold to other countries) minusthe value of imports (goods and services bought from other countries). Net exports can beeither positive (trade surplus) or negative (trade deficit).2Thus, when a country exportsmore than it imports, it has a trade surplus. When a country imports more than it exports,it has a trade deficit.VocabularyImports - foreign goods and services that are purchased from sellers in other nations.Exports - domestic goods and services that are sold to buyers in other nations.Trade deficit - when one country buys more foreign goods than it sells to other countriesTrade surplus - when one country sells more goods to other countries than it buysVirginia Board of Education FrameworkA trade deficit occurs when one country buys more foreign goods than it sells to othercountries. A trade surplus occurs when one country sells more goods to other countriesthan it buys.Teaching Tips1) Ask students if they are exporters or importers. What do they buy that is imported?Explain that buying an import sends money out of the country. When foreigners buythings from the U.S. money is coming into the country. Ask students if they think theU.S. exports more to other countries or imports more. Explain that exports minus importsis called “net exports.” Net exports can be a positive or negative number. When the U.S.buys more from other countries than it sells to them, the result is a negative number andis called a trade deficit. Find current data at this source:https://www.census.gov/foreign-trade/data/index.htmll2) Have students calculate what has happened to net U.S. exports (exports minus imports)because of changes in exports and imports over the last 10 years. Identify whether therehas been a trade surplus or trade deficit over these years. Find data on the governmentwebsite FRASER: Select “international statistics” and then U.S. International Trade in8Virginia Council on Economic Education

3) Imports are foreign goods and services that are purchased from sellers in other nations.Have students examine labels of products in their homes and compile a list of importedproducts and the countries from which they are imported.24) Exports are domestic goods and services that are sold to buyers in other nations. Havestudents determine what major products are produced in their community or state forexport and the countries to which they are exported.25) Have students describe how their daily lives would be different if people in the UnitedStates did not trade with people in other countries.Lessons and ResourcesFocus: Globalization Lesson 12: Trade, Investment, and the Balance of Payments; andAppendix B: What Is a Trade Deficit?Online resource for current trade balance:https://www.census.gov/foreign-trade/data/index.htmlOnline resource: FRASER: Select “international statistics” and then U.S. InternationalTrade in Goods and Services.www.gpo.gov/fdsys/browse/collection.action?collectionCode=ECONI&browsePath=2010%2F12%2F7&isCollapsed=false&leafLevelBrowse=false&isDocumentResults=true&ycord=203Census Bureau: U.S. Trading Partnershttps://www.census.gov/foreign-trade/statistics/highlights/toppartners.html9Virginia Council on Economic Education

EPF.9 The student will demonstrate knowledge of the global economy byd) explaining exchange rates, and the impact of a strong dollar and weak dollar oneconomic decisions.Days 1 & 2 - Changing exchange rates: who is helped and whois hurt when the dollar strengthens or weakens?Content KnowledgeAn exchange rate is the price of one nation’s currency in terms of another nation’scurrency. Like other prices, exchange rates are determined by the forces of supply anddemand. Foreign exchange markets allocate international currencies.When the exchange rate between two currencies changes, the relative prices of the goodsand services traded among countries using those currencies change; as a result, somegroups gain and others lose.2VocabularyExchange rates - The price of one nation's currency in terms of another nation'scurrency.Strong currency – When a currency grows stronger, it purchases more units of anothernation’s currency than it has before. Stronger currencies tend to lead to increased importsand decreased exports.Weak currency – When a currency grows weaker, it purchases fewer units of anothernation’s currency than it has before. Weaker currencies tend to lead to decreased importsand increased exports.Virginia Board of Education FrameworkAn exchange rate is the price of one nation’s currency relative to another nation’scurrency. Like prices, exchange rates are determined by supply and demand. When thedollar grows stronger against another currency, it means people holding dollars get moreof the other currency for each of their dollars (e.g., a stronger dollar would get moreeuros per dollar).A stronger dollar helps Americans traveling abroad or buying imports because it makesforeign hotels and goods less expensive. A stronger dollar hurts Americans sellingexports to shoppers in other countries, because it makes the United States goods moreexpensive.A weaker dollar hurts Americans who travel abroad or buy imports because it makesforeign hotels and goods more expensive. A weaker dollar helps Americans producingand selling exports to shoppers in other countries, because the United States goods arethen cheaper to foreigners.10Virginia Council on Economic Education

Teaching Tips1) Discuss traveling to countries and the process of exchanging currency. Let studentsdescribe their experiences.2) Look at the exchange rates between the US dollar and the Euro since 2002. At somepoints one could buy a Euro for 80 cents –which is the same as getting a 20% discountfrom the price. At other points a Euro cost $1.50—which means that something that costs10 Euros actually would cost someone from the US $15. So, exchange rates matter.3) Ask students who sets exchange rates. Government? No. Exchange rates aredetermined through supply and demand. If more people want to buy American goods orif people think the US dollar is the safest currency, the value of the dollar should rise, andvice versa.4) Teach students to calculate currency exchanges. Calculate the following: a) If theBritish pound is worth $2.10, how much would you have to pay in England for a shirtthat costs $16.00? b) If the Mexican peso is equal to $0.10 in U.S. dollars, what is thepeso equivalent of $15.00? c) If it takes 33 Indian rupees to buy $1.00, how much is anIndian sweater purchased for 1,000 rupees in U.S. dollars?25) Use the following scenarios to analyze the effects on trade of a change in exchangerates: In one year, the U.S. dollar equaled 150 Japanese yen; in the following year, theU.S. dollar equaled 100 yen; and in the third year, it equaled 125 yen. If a camera costs60,000 yen and a radio costs 10,000 yen: a) What will be the price in dollars of these twoproducts in each year for an American? b) Will an American want to buy more or fewerJapanese products in year one, in year two, or in year three? Explain.6) Show the Paul Solman video on currency choices “Made in China”. Ask: Did the USwant the dollar to be stronger or weaker against the Chinese currency and why? What didthe Chinese want? (Questions to go with this video clip are on the same page.)Lessons and ResourcesCapstone Unit 7, Lesson 42: Foreign Currencies and Foreign ExchangeEconomics in Action Lesson 14: Exchange Rates: Money Around the WorldAP Economics: Macroeconomics - Student Activities Macro Unit 6, Lesson 3: Activity53 - Exchange Rates11Virginia Council on Economic Education

Making Sense with Paul Solman: Dollar's Weakness Inspires Modern-day Gold Rushhttps://www.econedlink.org/resources/making-sene-with-paul-solman-dollars-weakness-inspires-modern-day-gold-rush/Making Sense with Paul Solman: How Currency Choices 'Made in China' Have BigImpact on U.S. Economyhttps://www.econedlink.org/resources/making-sene-with-paul-solman-how-currency-choices-made-in-china-have-big-impact-on-u-s-economy/Videos“The Money Song,” by Monty Python’s Flying Circushttp://www.youtube.com/watch?v=crARnAJv1EMhttp://www.youtube.com/watch?v=xwtgByffoUw (exchange rates)CartoonsFrank and Earnest on exchange rateshttps://www.cartoonistgroup.com/subject/The-Currency+exchange-Comics-and-Cartoons-by-Frank+and+Ernest.php12Virginia Council on Economic Education

EPF.9 The student will demonstrate knowledge of the global economy bye) describing the costs and benefits of trade barriers.Day 1 - Who is helped and who is hurt by trade barriers?Content KnowledgeAlthough barriers to international trade usually impose higher costs than benefits, theyare often advocated by people and groups who expect to gain substantially from them.Because the costs of these barriers are typically spread over a large number of peoplewho each pay only a little and may not recognize the cost, policies supporting tradebarriers are often adopted through the political process.Students will be able to use this knowledge to negotiate exchanges and identify the gainsto themselves and others. Students will also be able to compare the benefits and costs ofpolicies that alter trade barriers between nations, such as tariffs and quotas.1VocabularyEmbargo - a policy forbidding trade in a certain good (e.g., ivory) or with a certaincountryTrade barriers - Restrictions that prevent free trade among nations. Examples includetariffs, import and export quotas, and nontariff restrictions such as licensing requirementsand bureaucratic red tape.Tariff - A tax on an imported good or service.Quota - In international trade, the limit on the quantity of a product that may be importedor exported, established by government laws or regulations; in command economies,more typically a production target assigned by government planning agencies to theproducers of a good or service.Virginia Board of Education FrameworkTrade barriers include tariff — a tax on imports quota — a limit on the quantity of a good allowed into a countryembargo — a policy forbidding trade in a certain good (e.g., ivory) or with acertain countryTrade barriers reduce trade thus reducing competition for domestic producers andreducing choices for consumers.Trade barriers help domestic producers of the protected good by reducing the competitionfor their good (e.g., sugar).13Virginia Council on Economic Education

Trade barriers hurt consumers by raising prices of the protected good (e.g., sugar) andhurt foreign producers of the good who wish to export to the United States.Although barriers to international trade usually impose more costs than benefits, they areoften advocated by people and groups who expect to gain substantially from them.Incentives exist for political leaders to implement policies that disperse costs widely overlarge groups of people and benefit small, politically powerful groups of people.Because the costs of these barriers are typically spread over a large number of people,each of whom pays only a little and may not recognize the cost, policies supporting tradebarriers are often adopted through the political process.When imports are restricted by public policies, consumers pay higher prices, and jobopportunities and profits in importing firms decrease.Teaching Tips1) Free trade increases worldwide material standards of living. Identify the net benefitswhen a trade barrier such as sugar or automobile import quotas is eliminated.22) The gains from free trade are not distributed equally, and some individuals or groupsmay lose more than they gain when trade barriers are reduced. . Explain how free trade inthe automobile industry makes consumers better off while some auto workers lose theirjobs.23) Despite the mutual benefits from trade among people in different countries, manynations employ trade barriers to restrict free trade for national defense reasons, to protectkey industries, or because some companies and workers are hurt by free trade. Havestudents look at historical examples of periods when the United States has imposed tradebarriers and explain why the U.S. government would impose trade barriers given themutual benefits of free trade.24) When imports are restricted by public policies, consumers pay higher prices and jobopportunities and profits in exporting firms may decrease. Have students analyze thepolitical and economic implications of a proposed ban on imported products.25) Explain why a political leader would support an idea that helps only a few whileharming many, such as a tariff on imported luggage.26) The Wide World of Trade lesson is a particularly good hands-on activity demonstratingwho is hurt and who is helped by trade barriers.Lessons and ResourcesAP Economics: Macroeconomics – Student Activities Macro Unit 6, Lesson 2: activity51 - Barriers to Trade14Virginia Council on Economic Education

Economics in Action Lesson 13, activity 13.2: Comparative Advantage and Trade in aGlobal EconomyFocus: Globalization Lesson 10: Protecting the US Sugar Industry from ForeignOutsourcing: A Bittersweet IdeaWide World of Trade Lesson 9: Why Restrict Trade?Econedlink lesson. The U.S. Sugar Program - A Matter of National Security or CorporateWelfare?https://econedlink.org/resources/the-u-s-sugar-program-a-matter-of-national-security-or-corporate-welfare/ReadingsU.S. - China Trade War Timeline. “All items made in Hong Kong to be labeled ‘Made inChina.’”https://www.china-briefing.com/news/the-us-china-trade-war-a-timeline/VideoMJM Foodie: Barriers to Trade. http://www.youtube.com/watch?v=Y2X3KPilAt015Virginia Council on Economic Education

EPF.9 The student will demonstrate knowledge of the global economy byf) describing the effects of international trade agreements and the World TradeOrganization.Day 1 - How do trade agreements increase trade?Content Knowledge.International trade agreements such as the North American Free Trade Agreement(NAFTA) have tended to reduce trade barriers. Likewise, the World Trade Organization(WTO) seeks freer trade among nations.1VocabularyEuropean Union (EU) – An association of European nations created by the MaastrichtTreaty signed in 1992. The EU has eliminated quotas and tariffs among its members andcreated other common economic policies.North American Free Trade Agreement (NAFTA) – A treaty signed by Canada,Mexico and the United States in the 1990s which promises to reduce trade barriers of allkinds between the member nations.Trade agreement – A formal treaty or structure that is designed to improve the flow oftrade between participating nations.World Trade Organization (WTO) – A trade agreement among over 100 nations thatspecifies the level of tariffs among the signatories and attempts to resolve trade disputes.Virginia Board of Education FrameworkTrade agreements establish rules about trade that all parties agree to. These agreementshave generally reduced the barriers to trade.The North American Free Trade Agreement (NAFTA) established a free-trade zone(Canada, Mexico, and the United States) with the intention of eliminating trade barriers,promoting fair competition, and increasing investment opportunities.The World Trade Organization (WTO) administers trade agreements, handles disputes,and provides a venue for negotiating among its member nations.The European Union (EU) is a regional trade organization formed to promote tradeamong countries in Europe by reducing trade barriers and adopting a common currency,the euro.Teaching Tips1) What is the purpose of establishing trade agreements? Trade agreements establish rulesabout trade that all parties agree to. These agreements have generally reduced the barriersto trade.116Virginia Council on Economic Education

2) Review the benefits of trade. Remind students that trade barriers tend to benefit a fewand raise costs to many.3) What is NAFTA? Who are its participants? What is its purpose? Who are theparticipants in NAFTA? The North American Free Trade Agreement (NAFTA)established a free-trade zone (Canada, Mexico, and the United States) with the intentionof eliminating trade barriers, promoting fair competition, and increasing investmentopportunities.14) What is the role of the World Trade Organization (WTO)? The World TradeOrganization (WTO) administers trade agreements, handles disputes, and provides avenue for negotiating among its member nations.15) What is the European Union (EU)? The European Union (EU) is a regional tradeorganization formed to promote trade among countries in Europe by reducing tradebarriers and adopting a common currency, the euro.1Lessons and ResourcesFocus: Globalization Lesson 1: Why is Globalization So Controversial?Focus: International Economics Lesson 18: The NAFTA DebateFocus: Institutions and Markets Lesson 11: Hey, Hey, Ho, Ho, Why Do We Need theWTO?Econedlink Inquiry Lesson. NAFTA: Did Jobs Get Sucked Out of the U.S.?https://econedlink.org/resources/nafta-are-jobs-being-sucked-out-of-the-united-states/VideoHistory of GATT and WTO http://www.youtube.com/watch?v=27J3CByXKowWhat is the E.U.? http://www.youtube.com/watch?v=b2-4gpRIkUE17Virginia Council on Economic Education

EPF.9 The student will demonstrate knowledge of the global economy byg) explaining growing economic interdependence.Day 1 - How does globalization make countries moreinterdependent?Content KnowledgeGreater specialization leads to interdependence between producers and consumers. As aresult of growing international interdependence, economic conditions and policies in onenation increasingly affect economic conditions and policies in other nations.1VocabularyInterdependence - A situation in which decisions made by one person affect decisionsmade by other people, or events in one part of the world or sector of the economy affectother parts of the world or other sectors of the economy.Globalization - Although there is no one precise definition, the term usually refers to theincreased flow of trade, people, investment, technology, culture and ideas amongcountries.Outsourcing occurs when a firm in one country hires people in other countries to dowork.Offshoring occurs when a firm in one country tries to reduce costs by locatingproduction facilities in other countries.Virginia Board of Education FrameworkThe economy of the United States depends on resources and markets around the worldfor the production and sale of goods and services.When other economies slow, they may buy less from the United States, and this can slowthe United States economy. When other economies expand, they may buy more from theUnited States, stimulating the United States economy.To be competitive and increase profits, businesses seek to reduce costs of production.When natural or human resources are cheaper in other countries, United States businessesuse foreign resources when they can, affecting the United States labor market. This mayinvolve moving production to other countries (i.e., offshoring) or sending work via theInternet to workers in other countries (i.e., outsourcing).When foreign goods are cheaper or better, United States consumers may buy them,affecting the demand for United States goods and services and the jobs of those whoproduce them.18Virginia Council on Economic Education

Teaching Tips1) Have students brainstorm benefits and costs of globalization in their lifetime. Highschool students might enjoy this video made by an Auburn University student:http://www.youtube.com/watch?v=LtmvksvSvtc Or you may want to show this eightminute video. http://www.youtube.com/watch?v=3oTLyPPrZE4Discuss the factors that have increased globalization. What have been some of thecosts and benefits?2) Help students understand that some people favor and some oppose globalization. Thelesson below from Focus: Globalization helps explain why people have differentopinions.3) What are some ways in which globalization has increased interdependence?● When other economies slow, they may buy less from the United States, and thiscan slow the United States economy.● When other economies expand, they may buy more from the United States,stimulating the United States economy.● To be competitive and increase profits, businesses seek to reduce costs ofproduction. When natural or human resources are cheaper in other countries,United States businesses use foreign resources when they can, affecting theUnited States labor market. This may involve moving production to othercountries (i.e., offshoring) or sending work via the Internet to workers in othercountries (i.e., outsourcing).● When foreign goods are cheaper or better, United States consumers may buythem, affecting the demand for United States goods and services and the jobs ofthose who produce them.4) As a result of growing international economic interdependence, economic conditionsand policies in one nation increasingly affect economic conditions and policies in othernations. Have students analyze data on the kinds and value of goods that Japan, Canada,Mexico, and Germany export to the United States and predict the likely effect of arecession in the United States on the economies of these countries. Have students explainhow a tariff on imported cacao beans affects the production of chocolate candy in theUnited States and how it affects people in cacao-growing countries.2Lessons and ResourcesFocus: Globalization Lesson 1: Why is Globalization So Controversial? See lessondemonstration at:https://www.econedlink.org/resources/why-is-globalization-so-controversial-lesson-demo/Capstone Unit 7, Lesson 39: Why Go Global?19Virginia Council on Economic Education

Videos“Globalization” http://www.youtube.com/watch?v=3oTLyPPrZE4Created by Auburn University student http://www.youtube.com/watch?v=LtmvksvSvtc20Virginia Council on Economic Education