TCW-Lesson 2 (Global Economy)Solved!

Economic Globalization Historical process representing the results of human innovation and technological progres (IMF) Economic Globalization Increasing integration and interdependence of economies around the world Silk Road It is the oldest known international trade route; China, Middle-east, Europe Nations connected to the network of pathways of the silk road False Silk went eastward; wools, golds and silver went west. True Although international, it was not truly global Lacked maritime trade Why was the silk road not considered truly global? Flynn and Giraldez Though international, the SILK ROAD was the age of globalization truly began when populated continents started to exchange products continuously Mercantilism Countries started economic policies that maximize the exports and minimize the imports Galleon trade The 200 year naval commerce between Manila and Mexico, passing by Guam. Mercantilism an economic system (Europe in 18th C) to increase a nation's wealth by government regulation of all of the nation's commercial interests False Mercantilism also had no restrictions. Monarchies imposed low tariffs and allowed colonies to trade with other competitors Gold Standard A monetary system in which paper money and coins are equal to the value of a certain amount of gold Gold Standard This is a more open trade system initiated in the US and Europe to prevent isolationists mercantilism. True Many countries abandoned the gold standard when their gold reserves were depleted during the second world war Fiat Currencies The legal tender whose value is backed by government that issued it. Fiat Currencies The system allows government to regualte production of money in circulation as they see fit. False Too much money causes hyperinflation which is a good thing for the economy of the country Four Interconnected Dimensions of Economy 1) Globalization of Trade of Goods and Services 2) Globalization of Financial and Capital Markets 3) Globalization of Technology and Communication 4) Globalization of Production Globalization of Trade of Goods and Services E.g. the establishment of the World Trade Organization, the emergence of China as a major exporter of manufactured goods, BPOs Globalization of Financial and Capital Markets E.g. the cross-listing of company shares of foreign stock exchanges, the 24-hour trading, cross-hedging Globalization of Technology and Communication E.g. the online transactions, interactivities happening due to advancements of communication technology Globalization of Production E.g. the presence of multinational corporations (MNCs) and transactional corporations (TNCs) Agents of Interdependencies of Global Economies 1. The Nation state: the manager of the global economy 2. Global Corporations: national products technologies, and industries are obsolete 3. International Monetary System: facilitate economic globalization Gold Standard Fixed exchange rate with gold as the international reserve Bretton Woods System A system in which all currencies were pegged at a fixed rate to the US dollar. True BWS established International Bank for Reconstruction and Development (now World Bank) for post-war reconstruction; and International Monetary Fund for international trade. True or False European Monetary System EU system designed to create a zone of monetary stability in Europe, control inflation, and coordinate exchange rate policies of EU countries. Effect of Economic Globalization Globalization gives companies competitive advantage by allowing them to source cheaper raw materials offshore Effect of Economic Globalization Global corporations leverages the technical and production expertise and take advantages of the lower labor costs of developing countries Effect of Economic Globalization Globalization decreases the cost of manufacturing and allows consumders to have acces to a wider variety of goods Effect of Economic Globalization Globalization exposes manufacturers and workers in industrialized economies to competition with lower-cost markets Effect of Economic Globalization Lower cost markets may suffer from exploitation of workers when jobs are outsourced in countries with weak worker portection programs Effect of Economic Globalization Globalization results to higher cases of uneven income distribution and eventually lead to disparaity in wealth