In order for a country to specialize its production, what must there be?
international division of labor
The existence of an international division of labor among countries enables those countries to have what?
specialized production
The global economy can have specialized production because of what?
The international division of labor
Country X would have an absolute advantage over Country Y in the production of automobiles under what conditions?
Country X can manufacture cars more cheaply.
Country A would have an absolute advantage over Country B in the production of computers under what circumstance?
Country X would enjoy an absolute advantage in the production of clothing under what circumstance?
Its production costs for clothing were the lowest
in the world
What gives a country a comparative advantage?
When it gives up less than others to engage in a
particular type of production
Under what circumstance would a country have a comparative advantage in the production of a certain good?
It has a lower opportunity cost for production of
that good.
Country X would have a comparative advantage in the production of cotton under what circumstance?
Country X didn’t have to give up a more profitable
form of production in order to grow cotton.
Why does interdependence bring economic growth?
Interdependence enables specialized production,
which is more efficient.
Why do some countries fear increasing economic interdependence?
Interdependence involves a loss of control over
the national economy.
Why does the growth of international trade lead to a rising global standard of living?
International trade enables specialization, which
brings increased efficiency and greater
competition.
Which of these best characterizes the flow of wealth during the period of colonization?
There was a one-way flow of wealth from the
colonies to their colonial masters.
What was the result of developed countries extracting resources from their colonies?
There was a one-way flow of wealth favoring the
colonizers.
How did the colonizers benefit from the colonies they controlled?
The colonizers used the resources of their colonies
to grow their own economies.
Why do high tariff levels restrict international trade?
Traded goods cost more when there are high
tariffs, and this limits their sale.
Why do protective tariffs lead to reduced international trade?
Protective tariffs increase the price of goods and
limit the sale of those goods.
Why does reducing trade barriers promote increased international trade?
Free trade leads to lower prices and greater
sales.
Match each current trend in the global economy with one of its economic effects
Improved communication: Easier outsourcing; Trade liberalization: Increased trade;
Infrastructure development: Cheaper transportation;
Industrialization: Greater productivity.
Match each current trend with one of its economic effects.
Improved communication: Makes it easier for International businesses to operate efficiently; Trade liberalization: Provides an incentive for
countries to export more goods; Infrastructure development: Facilitates less expensive international trade;
Industrialization: Increases productivity and lowers prices.
Match each current trend in the global economy with the benefit it provides.
Improved communication: Facilitates international trade;
Free-trade policies: Increases the mobility of
goods and labor;
Development of infrastructure: Reduces distribution costs;
Industrialization: Helps developing countries.
Why does globalization give countries an incentive to reduce wages for their workers?
Lower production costs help lure foreign
investment.
Why does globalization lead to a reduction in wages in developed countries?
Increased mobility allows producers to move jobs
to lower-cost labor markets.
Why does globalization lead to a reduction in prices for goods and services?
Competition for jobs drives down wages, which
helps companies lower their prices.
Why do central banks play an important role in the global economy?
They set each country’s monetary policies.
Why do the actions of central banks have an important effect on the global economy?
Control of the money supply determines how
much money is available for international trade.
Why do central banks play an important role in the global economy?
They control the foreign currency reserves that
are used for international trade
Which of these is a gift of money from one government to another?
Foreign aid
Why is foreign aid given?
In order to help needy countries
What is the main purpose of foreign aid?
Alleviate poverty and underdevelopment
Match each international organization with its purpose.
Bank for International Settlements (BIS): Create financial stability;
International Monetary Fund (IMF): Prevent
economic crises;
World Bank: Reduce poverty;
World Trade Organization (WTO): Promote free
Match each international organization with one of its functions.
Bank for International Settlements (BIS): Coordinate banking regulations;
International Monetary Fund (IMF): Provide short-term emergency loans;
World Bank: Provide long-term development loans;
World Trade Organization (WTO): Generate
multilateral trade agreements.
Match each international organization with one of its purposes.
Bank for International Settlements (BIS): Provide a forum for coordinating banking regulations; International Monetary Fund (IMF): Make economic policy recommendations;
World Bank: Promote sustainable development; World Trade Organization (WTO): Mediate and resolve trade disputes.
Why does the IMF impose conditionality on countries that accept its loans?
The IMF wants to help fix the economies of
countries that need its help
Why does the IMF require countries that accept its loans to follow its policy recommendations?
The IMF wants to help struggling countries better
manage their economies.
Why does the IMF impose conditions on its loans?
To help manage the economies of struggling
countries
What is the main purpose of the loans made by the World Bank?
To help countries achieve sustainable
development
Why does the World Bank charge little or no interest on the loans it makes?
Its main purpose is to promote development, not
make profits.
What does the World Bank hope will result from the loans it makes to developing countries?
An improved climate for foreign investment
How does the WTO help stabilize the global economy?
By assuring that producers will have open access
to necessary resources
How does the WTO promote global free trade?
By creating multilateral trade agreements
What is the main goal of the WTO?
To assure that international trade flows smoothly
and freely
Match each economic activity with one of its purposes.
World Bank loans: Eliminate poverty;
Foreign aid: Provide emergency relief;
Trade embargo: Punish an offending government; Outsourcing: Reduce production costs.
Match each economic activity with its main purpose.
IMF loans: Stabilize the global economy;
Foreign aid: Help needy governments;
Boycott: Influence economic decisions; Offshoring: Reduce production costs.
Match each economic activity with its main purpose.
WTO agreements: Promote free trade;
Boycott: Punish unfair practices;
Offshoring: Reduce production costs;
Foreign aid: Help needy governments.
Why has globalization led to an increasing income gap between rich and poor countries?
Countries with well-established infrastructure and
productive capacities have more competitive
industries.
Why are the majority of the world’s countries left on the margins of globalization?
Many countries are too underdeveloped to take
advantage of the opportunities presented by
increasing international trade.
Why hasn’t globalization benefited the majority of the world’s underdeveloped countries?
Underdeveloped countries don’t have the
productive capacities necessary to take
advantage of increasing international trade.
Match each type of country with one of its central features
Developed: High level of productive capacity; Developing: Low standard of living; Underdeveloped: Little infrastructure or industry; New globalizer: Rapid economic growth
Match each type of country with one of its central features.
Developed: High level of productive capacity; Developing: Low standard of living; Underdeveloped: Little infrastructure or industry; New globalizer: Rapidly increasing levels of exports.
Match each type of country with one of its central features.
Developed: High level of productive capacity; Developing: Low standard of living; Underdeveloped: Low levels of industrial capacity; New globalizer: High levels of foreign investment.
Why don’t developing countries usually benefit from free-trade policies?
Their industries are too weak to compete in the
international market.
Why don’t many developing countries benefit from the spread of free trade?
They have weak domestic industries
Because most developing countries have weak domestic industries, they do not benefit from what?
Free-trade policies
Why has globalization contributed to the rise of international terrorism?
Globalization can bring about dislocation and
inequality.
How has globalization contributed to the recent increase in international terrorism?
The downsides of globalization affect many people who often feel they have nowhere to turn other than violence.
Why do many people object to globalization?
They feel that globalization mainly serves the
interests of the United States at the expense of
poor countries
Why don’t companies doing business in countries with repressive governments object to the human rights abuses?
Companies taking advantage of low labor costs
don’t make trouble for repressive governments.
Why don’t companies that do business in countries where human rights are violated tend to fight against these abuses?
They tend to care more about a safe investment
climate than about human rights.
How has globalization helped work against human rights violations around the world?
Improved global communications brings these
abuses to the world’s attention.
Why is globalization potentially damaging to the environment?
Protecting the environment increases production
costs and reduces competitiveness.
What is the primary reason that globalization leads to greater global pollution?
Environmental protection is expensive, and
reduces a company’s competitiveness in the global
market.
Why does globalization lead to increasing environmental damage?
Environmental-protection regulations increase
compliance costs and decrease economic
competitiveness.
Match each practice with an example of its use
Offshoring: A U.S. car company begins making certain car parts in Bangladesh;
Boycott: Consumers refuse to buy goods from companies that use child labor;
Trade sanctions: Japan imposes a 100% tariff
on cars coming from Europe and the United
States;
Conditionality: The IMF requires a loan
recipient to privatize its oil industry.
Match each global business practice with an example of its use.
Outsourcing: A U.S. computer company buys its memory chips from a company in Taiwan;
Boycott: A group of consumers refuses to buy clothing made in Indonesian sweatshops; Conditionality: The IMF asks a government to cut its taxes before receiving an emergency loan.
Match each global business practice with an example of its use.
Embargo: The United States forbids its citizens from doing business with a government that has ties to terrorist groups;
Insourcing: A South Korean car company opens a factory in the United States;
Conditionality: The IMF requires a government
receiving a loan to balance its budget
Which of these would cause job loss in the United States?
Inexpensive imported televisions
Why has globalization led to some job loss in the United States?
Labor costs are lower in other countries.
Why do lower labor costs in other countries lead to job loss in the United States?
It enables foreign producers to undersell domestic
producers.
What has been the main benefit of globalization for the United States?
Economic growth
What has been the main drawback of globalization for the United States?
Wage reductions
Which of these is a problem that globalization poses for the U.S. government?
Increased security concerns
All of the following have been negative effects of globalization except what?
Higher prices for consumers
What is one reason why some people are critical of globalization?
It leads to increased damage to the environment.
Which of these is a reason why many don’t support globalization?
It only benefits a handful of the world’s countries
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