Chapter 13 Flashcards
What are the components of globalization?
Culture, language, economics, politics, and more
What is the other name for globalization in the economic sphere?
International economic integration
How do economists measure international integration?
By looking at world trade, international capital flows, international migration, and convergence of prices in different markets
How do economists measure the importance of world trade?
With the use of the trade-to-GDP ratio
What is the equation for the trade-to-GDP ratio?
(Exports + Imports) / GDP
What are the different types of capital flows?
Financial flows representing paper assets such as stocks and bonds.
Capital flows that are used to purchase real assets such as real estate, or to set up businesses and factories.
The purchase of real assets is know as foreign direct investment (FDI).
How are capital flows today?
Are much larger than during the earlier wave of globalization;
Include many more types of financial instruments;
Are frequently devoted to protecting against currency fluctuations;
Have lower transaction costs than in previous eras.
What are capital flows?
They are savings of one country that are invested in another
What do high savings countries tend to have?
High investment
What do low savings countries have?
Low investment
What are the three features of contemporary international economic relations?
More deep integration, moving beyond shallow integration.
The presence of multilateral organizations such as the World Trade Organization (WTO)
The growth of regional trade agreements, such as the European Union or the North American Free Trade Agreement.
What does shallow integration consist of?
Shallow integration consists of the removal of tariffs (taxes on imports) and quotas (physical limits on import quantities).
What other policies begin to limit trade as tariffs and quotas come down?
Environmental policies
Labor policies
Safety standards, etc.
When does deep integration occur?
Deep integration occurs when countries try to reform domestic policies that limit trade.
Deep integration is much more controversial.
What are multilateral organizations open to?
They are open to all countries
How do multilateral organizations reduce uncertainty in international economic relations?
Mediate disputes;
Are forums for setting rules;
Propose solutions to problems;
Provide technical and financial assistance.
What are regional trade agreements?
They are composed of countries that give special market access to each other
Why are RTAs controversial among some economists?
Some economists think they hurt world trade by focusing a country’s attention on just a few trade partners.
Others believe they help world trade by loosening some barriers and trying out new agreements.
What kind of trade do economists favor?
They favor more open trade because it enables countries to grow faster and its people to live better
