Chapter 1 Flashcards
Define Globalization
To trend away from distinct national economic units to and toward one huge global market.
Refers to the shift toward a more integrated and interdependent world economy.
What are the two facets of globalization?
- Globalization of Markets
- Globalization of Production
Define Globalization of Markets
Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture, and toward a system in which national markets are merging into one global market.
Refers to the merging of historically distinct and separate national markets into one huge global marketplace.
What are the two key facets of globalization?
Globalization of Markets
Globalization of Production
Define Globalization of Markets
The merging of distinct and separate national markets into one huge global marketplace.
Define Globalization of Production
Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production.
What is the goal of globalization of production?
Lower overall cost structure or improve the quality and function of their product and gain competitive advantage.
Define Factors of Production
Inputs into the productive process of a firm.
What are the the factors of production?
Labor
Management
Land
Capital
Technological Knowledge
What was the the “General Agreement on Tariffs and Trade” (GATT)?
International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO.
What should Global Institutions do?
Manage, regulate, and police the global marketplace.
Promote the establishment of multinational treaties to govern the global business system.
Be created by voluntary agreement between individual nation-states.
What is the “World Trade Organization” (WTO), and what does it do?
A global institution that succeeded the GATT.
It polices the world trading system and ensures nations adhere to the rules established in WTO treaties.
164 nations accounted for 98 % of world trade
What is the “International Monetary Fund” (IMF) and what does it do?
It is a global institution developed in 1944 by 44 nations.
It maintains order in the international monetary system.
It is lender of last resort to nation states whose currencies are losing value.
However, it requires them to adopt specific economic policies which sparks controversy.
What is the “World Bank”?
It is a global institution founded in 1944 by 44 nations.
It promotes economic development by giving low-interest loans to poor nations who wish to undertake significan infrastructure investments.
What is the “United Nations” (UN) and what does it do?
A global institution on October 24, 1945 with 193 member countries as of yet. (OG 51 countries)
It focuses on:
International peace and security
Developing friendly national relationships
Cooperating in solving international problems
Promoting respect for human rights
What is “Group of Twenty” (G20) and what does it do?
A global institution established in 1999 made up by finance ministers and central bank governors of the 19 largest economies in the world + the EU.
It makes up 90% of the world’s GDP.
It responded to the 2008/2009 financial crises.
What are the two drivers of globalization?
The declining trade and investment barriers
Technological change
When does “International Trade” occur?
When a firm exports goods or services to consumers in another country.
When does “Foreign Direct Investment” (FDI) occur?
When a firm invests resources in business activities outside its home country/
How has the role of technological change helped with globalization?
- Lowered the cost of transportation enabling firms to create global markets and facilitate the movement of products from country to country to respond to international customer demands.
- Lowered the cost of communication starting networks that help create electronic global marketplaces.
Define “Moore’s Law”
The power of microprocessor technology doubles and its costs of production fall in half every 18 months.
