Global Economy Flashcards
Refers to the increasing interdependence of world economies as a result of the growing scale of cross-boarder trade of commodities and services, flows of international capital and wide and rapid spread technologies.
Economic Globalization
It reflects the continuing expansion and mutual integration of market frontiers, and is an
irreversible trend for the economic development in the whole world at the turn of the
millennium
Economic Globalization
It 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 movements of goods, services, services, and capital across boarders.
Economic Globalization
It also refers to that movement of people (Labor) and knowledge (technology) across international borders.
Economic Globalization
A process making the world economy an organic system by extending transnational economic process and economic relations to more and more countries and by deepening the economic interdependencies among them.
Globalization
Two major driving forces for Economic Globalization:
- Rapid growing of information in all types of productive activities 2.Marketization
A restructuring process that enables state enterprises to operate as market-oriented firms by changing the legal environment in which they operate.
Marketization
can be achieved through reduction of state subsidies, organizational restructuring of management such as corporatization, decentralization, and privatization
Marketization
Dimensions of Economic Globalization
The globalization of trade of goods and services
The globalization of financial and capital markets
Tye globalization of technology and communication
The globalization of production
Is a functional integration of internationally dispersed activities which means it a qualitative transformation rather than a quantitate change.
Economic globalization
An extension of economic activities between internationally dispersed activities.
Internationalization
Economic globalization produces its own major players in the form of____________
Transnational Corporations (TNC’s)
Also known as Multi-national corporations
Transnational Corporations
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.
Transnational Corporations or Multi-national Corporations
A process that creates an organic system of the world economy.
Economic Globalization
Example of archaic globalization
Silk road
started in western China, reached the boundaries of the Parthian empire, and continued onwards towards Rome. It also connected Asia, Africa, and Europe
Silk road
In this century, century global economy exist only in trade and exchange rather production as the world export (world GDP did not reached 1-2%)
17th and 18th century
In the 17th and 18th century it only exist in trade and exchange rather than production as the world export to GDP did not reach 1-2%
Global Economy
The advent of globalization approaching its modern form is witnessed.
19th century
Refers to a system that forms rules and standards for facilitating international trade among the nations
International Monetary System (IMS)
It helps in reallocating the capital and investment from one nation to another.
International Monetary System (IMS)
It is the global network of the government and financial institutions that determine the exchange rate of different currencies for international trade.
International Monetary System (IMS)
It is a governing body that sets rules and regulations by which different nations exchange currencies with each other.
International Monetary System (IMS)
It also reflects economic power and interests, as money is inherently political, an integral part of high politics or diplomacy.
International Monetary System (IMS)
In 1870-1914 with the help of_______________trade was carried without any institutional support
gold and silver
During this time monetary system was decentralized while market based and money played a minor role in international trade in contrast to gold.
1870 - 1914
believed to guarantee a non-inflationary, stable economic environment, a means for accelerating international trade
Gold
It functioned as a fixed exchange rate regime, with gold as the only international reserve.
Gold standard
system of backing a country’s currency with its gold reserves.
Gold standard
The use of gold decline due to increase expenditure and inflation which was caused by war.
After world war l
In 1944, ____ representative of ____ nations met at the Bretton Woods, New Hampshire, United States to create a new international monetary system called as the _______________
77 representative | 44 Nations
Bretton Woods System
The aim of this system is to create a stabilized international currency system and ensure a monetary stability for all the nations.
Bretton Woods System
_________________ ended in ________ as the trade deficit and growing inflation undermined the value of dollar in the whole world.
Bretton Woods System | In 1971
Also known as flexible exchange rate system
Floating Exchange Rate
This was developed in 1973 that was a market based
Floating Exchange Rate
It has never worked satisfactorily in controlling inflation or maintaining equilibrium in international transactions.
The Gold Standard
To assess whether the gold standard was successful, the following roles of a
properly designed IMS must be considered:
To provide order and stability to international exchange market.
To encourage the elimination of balance of payment.
Provide access to international credit during the events of disruptive shock.
Refers to a 30 year long process that began at the end of the 1960’s.
European Monetary Integration
Form of monetary cooperation intended to reduce the excessive influence of US dollar on domestic exchange rate, and led, through various attempts, to the creation of a monetary union and a common currency.
European Monetary Integration
This union brings benefits to member states.
Monetary Union
In ______ arrangements between several European countries which links their currencies in an attempt to stabilized the exchange rate.
1979
(European Monetary System)
This system was succeeded by the European Economic and Monetary Union
The European Monetary Union
It is an Institution which established a common currency called Euro.
European Union
European Union established a currency called?
Euro
It originated to stabilized the inflation and stop the large exchange rate fluctuations between European countries.
European Monetary System
European Bank Was established
June 1998
Unified currency called______ was born___________
and came to be used by most EU member countries
Euro | January 1999
Unified currency called______ was born___________
and came to be used by most EU member countries
Euro | January 1999
Permanent fund created by the European Union to provide emergency assistance to members state within the union.
European Financial Stability Mechanism (EFSM)
An organization created by European Union to provide assistance to members state with unstable communities.
European Financial Stability Facility (EFSF)
It is a special purpose vehicle (SPV) managed by the European Investment Bank.
European financial stability facility
A lending institution
European investment bank
The exchange of goods, services, and capital across national boarders.
International trade
It is a multi million dollar activity-central to gross domestic product (GDP) of many countries
International trade
It is the only way for many people in many countries to acquire resources.
International trade
is the exchange of goods or services along international
borders.
International trade
This type of trade allows for a greater competition and more competitive pricing in the market
international trade
Two key concepts in the economics of international trade:
Specialization and comparative advantage
comes in; so long as the two countries have different relative efficiencies, the two countries can benefit from trade.
Comparative Advantage
The country with this advantage will still benefit by redirecting its resources to those goods where it is most productive and trading for the others
Absolute Advantage
It 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.
Specialization
This products for the consumer is also the result of competition
Affordable Products
More affordable products for the consumer is also the result of____________
Competition
gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries.
Trading Globally
allows wealthy countries to use their resources such as labor, technology, or capital more efficiently.
Global Trade
This happens in international trade happens if a country cannot efficiently produce an item and obtain it by trading with another country that can.
Specialization
refer to the regulations and agreement of
foreign countries.
Trade Policies
It defines standards, goals, rules, and regulations that pertain to trade relation between countries.
Trade policies
imposes on import and export, inspection, regulations, tariffs and quotas are all part of
country’s trade policy.
Taxes
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.
Tariffs
Imposing this on imported and exported goods is a right of every country.
Taxes
Imposing this on imported goods are levied by some nations for the protection of their local industries.
Heavy Tariffs
These are measures that governments or public authorities introduce to make imported goods or services less competitive than locally produced goods and services
Trade Barries
They are state-imposed restrictions on trading a particular product or with a specific nation.
Trade Barriers
It can be linked to the product, service like technical requirement and it can also be administrative in nature such as rules and procedures of transactions.
Trade Barriers
Most common types of trade barriers
Tariffs, duties, subsidies, embargoes and quotas.
This ensures that imported products in the country are of high quality.
Safety
Inspection regulations laid down by public officials ensure the safety and quality standards of imported products.
Safety
This safeguards the best interest of its trade and citizen.
National Trade Policy
To regulate the trade and business relations between two nations, this policy is formed.
Bilateral Trade Policy
This defines the_______________________ their charter like the International economic organizations, such as Organization for Economic Corporations 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.
International Trade Policy
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
is viewed as the means by which industrialized countries can gain access to the markets of developing countries.
World trade organization
an activity that requires search for a partner and relation-specific investments that are governed by incomplete contracts.
Outsourcing
is a central element of the new economy.
Subcontracting
It is the practice of assigning part of the obligations and tasks under a contract.
Subcontracting
prevalent in areas where complex projects are the norm like construction and information technology.
Subcontracting
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.
Outsourcing
One of the most rapidly growing components of international trade.
Outsourcing
Size of the country can affect the_____________
“thickness” of its markets
Possible Determinants of the location of the Outsourcing
- Size of the country can affect the “thickness” of its markets.
- The technology for search affects the cost and likelihood of finding a suitable
partner. - The technology for specializing components determines the willingness of a partner to undertake the needed investment in a prototype.
- The contracting environments can impinge on a firm’s ability to induce a partner to invest in the relationship.
