GLOBALIZATION

Globalization is the tendency of businesses, technologies, or philosophies to spread throughout the world, or the process of making this happen. The global economy is sometimes referred to as a globality, characterized as a totally interconnected marketplace, unhampered by time zones or national boundaries

ABSOLUTE ADVANTAGEAbsolute Advantage is when a country can produce more of a good than another country using the same quantity of resources

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ABSOLUTE ADVANTAGE

Example: U.S. can produce 1,000 tons of wheat in a week Japan can produce 100 tons of wheat in a week

In this case, who has the absolute advantage in wheat production?

US!

COMPARATIVE ADVANTAGEComparative Advantage is specializing in the production of a good it can produce at a lower opportunity cost.

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BENEFITS OF TRADE

Comparative Advantage video

QUIZ

What is the definition of opportunity cost?a) The money you spend to buy something.b) The next best alternative that you give up.c) The chance that you will lose your money.d) All of the choices you could have made but didn't.

QUIZ

What is the term to describe when a nation or individual can produce a good or service at a lower opportunity cost than another nation or individual?a) Specializationb) Tradec) Opportunityd) Comparative Advantage

QUIZ

What does comparative advantage

measure?a) How much it costs to produce a good or service.b) How many resources a nation has.c) How much each nation gives up in one good to produce

another good.d) None of these options

COMPARATIVE ADVANTAGE

When country A produces 1 unit of wheat, they give up producing ½ a TV. In other words, Country A’s opportunity cost is ½ a TV.

When Country A produces 1 TV, the opportunity cost is 2 units of wheat.

What are Country B’s opportunity costs?

Production PossibilitiesCountry A Country B

Wheat

200 50

TVs 100 50

FRIDAY

Who has absolute advantage in fish?

FridayWho has absolute advantage in coconuts?

FridayWhat is Crusoe’s opportunity cost of catching a fish?

10 coconutsWhat is Friday’s opportunity cost of catching a fish?

15 coconutsWhat is Crusoe’s opportunity cost of picking a coconut?

1/10 of a fishWhat is Friday’s opportunity cost of picking a coconut?

1/15 of a fish

ROBINSON CRUSOE

THE WORLD ENDS UP WITH MORE

Everyone Wins With Trade!

COMPLETE WORKSHEET CH 15 SEC 1

ATK TIME!

Trade creates wealth

INTERNATIONAL COOPERATION AND AGREEMENTS

International trade agreements can lead to international prosperity and peaceful relationships

North American Free Trade Agreement, NAFTA eliminated trade barriers between US, Canada, and Mexico

Signed by President Bill Clinton in 1994 the overall value of intra-North American trade has more than tripled since the agreement's inception

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INTERNATIONAL COOPERATION AND AGREEMENTS CONT. European Union, EU

over 28 member nationscreates free-trade zones that reduce or eliminate trade barriers

created a single currency

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INTERNATIONAL COOPERATION AND AGREEMENTS CONT. World Trade Organization, WTO

negotiates new trade agreements resolves trade disputes

From 1930-1995 the average tariff in the US dropped from 59% to 5%

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CAUSES OF ECONOMIC GROWTH? Little to no government debt

Low taxes and tariffs invite immigrants

Increase in productivity

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ORGANIZATIONS WORKING TO RAISE THE STANDARD OF LIVING IN MAJORITY COUNTRIESWorld Bank

Aims to reduce poverty in middle-income and poorer countriesProvide low-interest loans and grants for

Education Health Infrastructure Agriculture

Primarily a development institution

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ORGANIZATIONS WORKING TO RAISE THE STANDARD OF LIVING IN MAJORITY COUNTRIESInternational Monetary Fund (IMF)

Seeks to maintain an orderly system of payments and receipts between nations.

Ensure the stability of international monetary system (exchange rates)

Facilitate international tradeEOC study guideGlobalization #7

THE COSTS AND BENEFITS OF GLOBALIZATION

Get with a partner and read through pages 46-50 in the textbook. Create a two columned list describing the benefits and

costs of globalization

You MUST EXPLAIN----GIVE EXAMPLES