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Module 16 Notes

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17 views

Module 16 Notes

Uploaded by

reeyanpeekaboo69
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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MR ZIRKLE VIDEOS

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Many simple things are made from many activities and collaboration and cooperation of
many people.

Trade benefits:
1. Make people better off when preferences differ
2. Increases productivity through specialization and division of labor
3. Comparative advantage

Globalization means the world as a whole can become specialized and therefore world
knowledge increases due to trade and technology.

Comparative advantage - An economy’s ability to produce at a lower opportunity cost


than its trading partners where both people can benefit from trade. It all depends on the
opportunity cost for other people.

Institutions and climate are a source of comparative advantage.

Appreciation - Increase of the value of a currency. Depreciation is inverse. Exchange


rates can convert currency.

Globalization can be great since it allows movies to make more money with certain
effects. International market is now more profitable than the domestic market.

Globalization 1.0 - Most ideas consumed by people were local since trade and travel was
expensive and dangerous
Globalization 2.0 - Better ships, railroads and locomotives, and cars and trucks allow for
world trade in the 1800s
Globalization 3.0 - Cheap and fast communication, information revolution, people can
easily communicate information. Different parts can be made from across the world and
be shipped to make one final product.
Globalization 4.0 - Someone providing a service from one place to another place
remotely.

In Globalization 3.0, many countries developed such as India, China, and Brazil.
Most middle class workers didn’t make much money or didn’t even make money.
The richest of the rich made a lot of money since they could reach global markets.

People in the middle class are made since they are making no money, and these protests
occur throughout the world today. This is due to outsourcing (giving work
internationally) and automation.

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BOOK
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International trade is the key to prospering.
Absolute advantage - When one party can produce a good more than another party
Comparative advantage - A party can produce a good with a lower opportunity cost than
another party

Interdependence - When countries depend on each other

Parties can make gains from trade if they can trade one good for getting more of another
good they produced. When nations increase production in their area of comparative
advantage and trade with each other, both countries can benefit.

Opportunity costs set the boundary of trade.

Dollarize - Use the U.S. dollar as the form of currency


Foreign exchange market - The market in which people or firms exchange one currency
for another

Foreign direct investment - Purchasing a firm (at least ten percent) or starting a new
enterprise in another country
Portfolio investment - A financial investment in another country

Hedging - Entering a contract where the exchange rate is same for both parties after a
certain time period

When a currency increases in value compared to another, it is strengthening or


appreciating. When it decreases in value it is weakening or depreciating.

Flexible exchange rate is dependent on the demand and supply of the currency.

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