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The question of how to organize economic institutions is typically not a black-or-white choice between all market or all government, but instead involves a balancing act over the appropriate combination of market freedom and government rules.

Globalization

The image is a photograph of a cargo ship transporting goods.
Cargo ships are one mode of transportation for shipping goods in the global economy. (Credit: Raul Valdez/Flickr Creative Commons)

The rise of globalization

Recent decades have seen a trend toward globalization    , which is the expanding cultural, political, and economic connections between people around the world. One measure of this is the increased buying and selling of goods, services, and assets across national borders—in other words, international trade and financial capital flows.

Globalization has occurred for a number of reasons. Improvements in shipping, as illustrated by the container ship shown in [link] , and air cargo have driven down transportation costs. Innovations in computing and telecommunications have made it easier and cheaper to manage long-distance economic connections of production and sales. Many valuable products and services in the modern economy can take the form of information—for example: computer software; financial advice; travel planning; music, books and movies; and blueprints for designing a building. These products and many others can be transported over telephones and computer networks at ever-lower costs. Finally, international agreements and treaties between countries have encouraged greater trade.

[link] presents one measure of globalization. It shows the percentage of domestic economic production that was exported for a selection of countries from 2010 to 2013, according to an entity known as The World Bank. Exports are the goods and services that are produced domestically and sold abroad. Imports are the goods and services that are produced abroad and then sold domestically. The size of total production in an economy is measured by the gross domestic product (GDP)    . Thus, the ratio of exports divided by GDP measures what share of a country’s total economic production is sold in other countries.

(Source: http://databank.worldbank.org/data/)
The extent of globalization (exports/gdp)
Country 2010 2011 2012 2013
Higher Income Countries
United States 12.4 13.6 13.6 13.5
Belgium 76.2 81.4 82.2 82.8
Canada 29.1 30.7 30.0 30.1
France 26.0 27.8 28.1 28.3
Middle Income Countries
Brazil 10.9 11.9 12.6 12.6
Mexico 29.9 31.2 32.6 31.7
South Korea 49.4 55.7 56.3 53.9
Lower Income Countries
Chad 36.8 38.9 36.9 32.2
China 29.4 28.5 27.3 26.4
India 22.0 23.9 24.0 24.8
Nigeria 25.3 31.3 31.4 18.0

In recent decades, the export/GDP ratio has generally risen, both worldwide and for the U.S. economy. Interestingly, the share of U.S. exports in proportion to the U.S. economy is well below the global average, in part because large economies like the United States can contain more of the division of labor inside their national borders. However, smaller economies like Belgium, Korea, and Canada need to trade across their borders with other countries to take full advantage of division of labor, specialization, and economies of scale. In this sense, the enormous U.S. economy is less affected by globalization than most other countries.

Questions & Answers

2) One of the major assumption of the classical school is A) Lack of aggregate demand causes involuntarily unemployment B) Governments fiscal operations can reduce unemployment C) Unemployment and inflation can exist together D) Economy will be in full employment equilibrium in the long run
Ajay Reply
explain the scope of economics
Bhimshi Reply
Inflation occurs in a country due to what causes?
Daniel Reply
Lack of natural resources management
Kosiso
What is demand
TECK Reply
the amount of a good that buyers are willing and able to purchase
Asit
what is population
Amadou Reply
The people living within a political or geographical boundary.
Ziyodilla
what happens to price and quantity when demand curves shift to the right
Asha Reply
price level goes up. quantity demand increases
Asit
example- inferior goods
Asit
demand law
Athony
Its states that higher the price the of the commodity, and lower the quantity demanded
Kosiso
I am confused but quantity demand will increase.
Asit
No. That's the law of supply
Kosiso
the price goes down and quantity demanded increases
esther
Price goes down Demand quantity increases
Daniel
choice arises because of scarcity of resources
Umar
what happens to price and quantity when supply curve shifts left?
Asha Reply
price level will increase
Asit
quantity demand will decrease
Asit
what is inflation
Pop Reply
inflation is a general and ongoing rise in the level of prices in an entire economy.
cynthia
is the pasistance increase in the price of a country economy
Liyu
kk
Duppy
yes
Aadi
how does inflation affects the economy of a country? what is deflation?
Augustine
deflation can simply be define as the persistence decrease in price of a countrys economy
Liyu
the revenge of malthus relates "revenge" with "commodity prices". collect data for 3 commodoties and check their price evolution
Jamshi Reply
what is elasticity
dubela Reply
Elasticity is an economics concept that measures responsiveness of one variable to changes in another variable.
cynthia
right
Augustine
wooow!!
cynthia
Computer software represents
Mboledi Reply
पर्यावरण राज्यों में से किस राज्य में शिष्य शिक्षक अनुपात 30 से अधिक वाले विद्यालयों का प्रतिशत न्यूनतम होता है
plz Reply
Hey what are you trying to mean?
Kenyana
what is Asset
MUBARAK
like a banana
Ahmed
demand is the process whereby consumers are willing and able to purchase a particular product at various price over a given period of time
Samuel Reply
The law of dinimish
Frank Reply
What is the law of dinimish
Frank
What is the law of dinimish
Frank
What is the law of dinimish
Frank
opportunity cost is to forgo something for another.
jackie Reply
yes
King

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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