The Global Economy

Economic globalization

It refers to the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies.

Economic globalization

According to the International Monetary Fund (18) _____is a historical process, the result of human innovation and technological progress.

economic globalization

It refers to the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders. It also refers to the movement of people (labor) and knowledge (technology) across international borders

Marketization

A restructuring process that enables state enterprises to operate as market-oriented firms by changing the legal environment in which they operate (20) and can be achieved through reduction of state subsidies, organizational restructuring of management such as corporatization, decentralization, and privatization

1. The globalization of trade of goods and services 2. The globalization of financial and capital markets 3. The globalization of technology and communication 4. The globalization of production

Dimensions of Economic Globalization

Economic globalization

_____ is a functional integration between internationally dispersed activities which means that it is a qualitative transformation rather than a quantitative change

internationalization

_______ is an extension of economic activities between internationally dispersed activities (

transnational corporations (TNCs)

Economic globalization produces its own major players in the form of __________ , the main driving forces of economic globalization of the last 100 years or roughly two-thirds of world export

multi -national corporation

Transnational corporation otherwise known as_________ is a corporation that has a home base, but is registered, operates and has assets or other facilities in at least one other country at one time

Silk Road

This best known example of archaic globalization is the ______, which started in western China, reached the boundaries of the Parthian empire, and continued onwards towards Rome

16th century

In the ______ world system analysts identify the origin of modernity and globalization through long distance trade

17th and 18th century

In the +_________ global economy exists only in trade and exchange rather than production as the world export to World GDP did not reached 1 to 2 percent

19th century

In the ______ the advent of globalization approaching its modern form is witnessed.

World War I

A short period before ______ is referred to as golden age of globalization characterized by relative peace, free trade, financial and economic stability

International monetary system (IMS)

________- refers to a system that forms rules and standards for facilitating international trade among the nations. It helps in reallocating the capital and investment from one nation to another

gold and silver

In 1870 to 1914, with the help of _____, trade was carried without any institutional support. Monetary system during that time was decentralized while market based and money played a minor role in international trade in contrast to gold.

Gold

____ was believed to guarantee a non-inflationary, stable economic environment, a means for accelerating international trade (34) and the gold standard functioned as a fixed exchange rate regime, with gold as the only international reserve.

gold

After World War I, the use of ______ declined due to increased expenditure and inflation which were caused by war. Major economic powers were on gold standards but could not maintain it and failed because of the Great depression in 1931.

Bretton Woods system

the aim of which is to create a stabilized international currency system and ensure a monetary stability for all the nations.

Bretton Woods system

The ______ ended in 1971 as the trade deficit and growing inflation undermined the value of dollar in the whole world.

floating exchange rate system

In 1973, the _______, also known as flexible exchange rate system was developed that was market based

European monetary integration

______ refers to a 30-year long process that began at the end of the 1960s as a form of monetary cooperation intended to reduce the excessive influence of the US dollar on domestic exchange rates, and led, through various attempts, to the creation of a Monetary Union and a common currency. This Union brings many benefits to Member States.

The European Monetary System (EMS)

_______ on the other hand is a 1979 arrangement between several European countries which links their currencies in an attempt to stabilize the exchange rate.

euro

This system was succeeded by the European Economic and Monetary Union (EMU), an institution of the European Union (EU), which established a common currency called the _____.

The European Monetary System

____ originated in an attempt to stabilize inflation and stop large exchange rate fluctuations between European countries.

The European Financial Stability Mechanism (EFSM)

is a permanent fund created by the European Union (EU) to provide emergency assistance to member states within the Union.

The European Financial Stability Mechanism (EFSM)

It raises money through the financial markets, and is guaranteed by the European Commission. Fund raised through the markets, use the budget of the European Union as collateral.

The European Financial Stability Facility (EFSF)

_______ on the other hand, is an organization created by the European Union to provide assistance to member states with unstable economies.

The European Financial Stability Facility (EFSF)

The fund raises money by issuing debt, and distributes the funds to eurozone countries whose lending institutions need to be recapitalized who need help managing their sovereign debt or who need financial stabilization

International trade

______ is the exchange of goods, services and capital across national borders.

International trade

This type of trade allows for a greater competition and more competitive pricing in the market

specialization and comparative advantage

The two key concepts in the economics of international trade are _____.

Comparative advantage

_______ comes in; so long as the two countries have different relative efficiencies, the two countries can benefit from trade

absolute advantage

the country with ______ will still benefit by directing its resources to those goods where it is most productive and trading for the others

specialization

_____ refers to this process; countries as well as individual businesses can maximize their welfare by specializing in the production of those goods where they are most efficient and enjoy the largest advantages over rivals

Global trade

_____ allows wealthy countries to use their resources such as labor, technology, or capital more efficiently

Trade policies

_____ on the other hand refer to the regulations and agreement of foreign countries (45). It defines standards, goals, rules, and regulations that pertain to trade relation between countries

trade policy

Taxes imposes on import and export, inspection, regulations, tariffs and quotas are all part of country’s___

Tariffs

These are taxes or duties paid for a particular class of imports or exports. Imposing taxes on imported and exported goods is a right of every country. Heavy tariffs on imported goods are levied by some nations for the protection of their local industries. The prices of imported goods in local markets are inflated due to high imported taxes to ensure demand of local products.

Trade barriers

Theses are measures that governments or public authorities introduce to make imported goods or services less competitive than locally produced goods and services. Tariffs, duties, subsidies, embargoes and quotas are the most common trade barriers.

Safety

This ensures that imported products in the country are of high quality. Inspection regulations laid down by public officials ensure the safety and quality standards of imported products.

National Trade Policy

This safeguards the best interest of its trade and citizen.

Bilateral Trade Policy

To regulate the trade and business relations between two nations, this policy is formed. Under the trade agreement the national trade policies of both the nations and their negotiations are considered while bilateral trade policy is being formulated.

International Trade Policy

This defines the international trade policy under their charter like the International economic organizations, such as Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO) and International Monetary Fund (IMF).The best interests of both developed and developing nations are upheld by the policies.

World Trade Organization (WTO)

The _______ deals with the global rules of trade between nations with the main function of ensuring that trade flows smoothly, predictably and freely.

World Trade Organization (WTO)

is viewed as the means by which industrialized countries can gain access to the markets of developing countries

Outsourcing

_______ is an activity that requires search for a partner and relation-specific investments that are governed by incomplete contracts and the extent of international outsourcing depends on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs and the nature of the contracting environment in each country

Subcontracting

______ is a central element of the new economy (51). It is the practice of assigning part of the obligations and tasks under a contract to another party known as a subcontractor and especially prevalent in areas where complex projects are the norm like construction and information technology

Outsourcing

_______ is a means of finding a partner with which a firm can establish a bilateral relationship and having the partner undertake relationship-specific investments so that it becomes able to produce goods and services that fit the firm’s particular needs