1. Globalization and the World Economy Economics

2. What is Globalization? Globalization is the integration of economic activities through a market and across borders The creation of a single world market

3. What Has Caused Globalization? Technology Improved transportation of goods Improved communication around the world Government Policies Can set policies to open up or close trade with other countries

4. How can the government affect globalization? Barriers to free trade and globalization Limiting imports Embargos- refusing to trade with a particular country Tariffs- taxes on any goods that are imported into a country Used to make these goods equal to prices of domestic goods or higher than domestic goods prices Quotas- limit the number of certain goods allowed into a country at a specific time Restricting workers- limiting work permits for migrant workers

5. Developing Free Trade and Globalization Cutting Tariffs Usually will increase exports as well as imports Other countries become more willing to trade and will drop their own tariffs How can the government affect globalization?

6. World Trade Organization (WTO) Based off of numerous trade agreements (International Monetary Funds, World Bank, and General Agreement on Tariffs and Trade 1944) Protects trade on goods and services Services include: Insurance, telecommunications, hotels etc. Helps develop the economies of other countries Protect intellectual property- ideas and designs (copyrights)

7. How can the government affect globalization? WTO Controversies Labor Issues over poor labor conditions and child labor Some countries have an unfair labor advantage Environment Pollution concerns (China) Food Safety Concerns over how safe imported food is (GMO Food)

8. How can the government affect globalization? European Union (EU) 1993 Trade agreement between European countries Opened trade between European countries Created a single currency

9. How can the government affect globalization? North American Free Trade Agreement (NAFTA) Formed in 1993 Meant to increase trade between Mexico, US and Canada

10. What are Multinational Corporations? Multinational Corporation- a firm that has factories, offices or branches in two or more countries Ex. Microsoft, Toyota, Sony, Wal-Mart, McDonalds, Sony etc. Numerous large companies are becoming multinational due to Globalization

11. What are Multinational Corporations? Many companies produce their products in other countries or will build a plant in in the country the export their products to Why? Cheaper labor Save on shipping cost Cut import/export tariffs

12. Exchange Rates Foreign Exchange Market- where currency, from numerous countries, are bought and sold Exchange Rate- The value of a countrys currency in relation to another countrys currency Ex. 1 Euro = $1.294 Ex. 1 CAD = $0.978 Ex. 1 MX Peso = $0.080

13. Exchange Rates Fixed Rate of Exchange Currency values did not change daily and were set in regards to gold reserves (until 1971) Governments can set the value of their currency Flexible Exchange Rate Currency values are set in relations to supply and demand Traded in a manner similar to the stock market

14. Exchange Rates What impact does the Foreign Exchange Rate have on our economy? Can influence the cost of goods imported/exported Can lower or increase the price of finished goods due to cost of raw materials

15. Exchange Rates Balance of trade Currency depreciates (decreases in value)- export more goods due to other countries being more willing to buy at the lower price Currency value increases- import more goods due to foreign goods costing less Trade Surplus- export value is higher than import value Trade Deficit- import value is higher than export value

16. Major US Imports and Exports Imports Crude Oil Electronic equipment Cars Precious Metals and Gems Exports Food Products Electronic Equipment Cotton Vehicles

17. Major US Imports and Exports ImportsExports

18. Potential Short-Answer Questions What are some causes for Globalization Why do companies produce their goods outside of their home country? How are trade patterns established? How can the US Dollar exchange rate affect our economy?