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Carbaugh 9th Edition*:!%  $Chapter 1: The International EconomyElements of interdependenceTrade: goods, services, raw materials, energy Finance: foreign debt, foreign investment, exchange rates Business: multinational corporations, global production Forces driving globalizationTechnological change: Production Communication & information Transport Liberalization of trade & investment: Tariff, non-tariff barrier reductions Liberalized financial transactions International financial marketsL1&i1&iWaves of Globalization1st wave: 1870-1914 Falling tariff barriers improved transportation 2nd wave: 1945-1980 Agreements to lower barriers again Rich country trade specialization Poor nations left behind 3rd wave: 1980-present Growth of emerging markets international capital movements regain importance0^M 0 ^ M   HExports of goods and services as percent of Gross Domestic Product, 2001IH  3Leading trading partners of the United States, 200043  Interdependence: ImpactOverall standard of living is higher Access to raw materials & energy not available at home Access to goods & components made less expensively elsewhere Access to financing and investment not available at home International competition encourages efficiency&%% @Interdependence: Impact (cont d)$!Other impacts - good & bad Curtails inflationary pressures at home Limits domestic wage increases Makes economy vulnerable to external disturbances Limits impact of domestic fiscal policy on economy& Comparative advantage means:If the relative cost of making two items is different in two countries, each can gain by specializing in the one it makes most cheaply - each has a comparative advantage in that product Even countries that make nothing cheaply can benefit from specialization*Z 'Common fallacies of international trade('% "Trade is zero-sum" - trade can bring benefits to both partners "Imports bad, exports good" - if you buy nothing from other countries, they have no income to buy from you "Tariffs and quotas save jobs" - cutting imports makes it harder to export, so other jobs are lost Competitiveness & trade?Main objective of any nation is to generate high and rising standard of living No nation can efficiently make everything itself International trade allows countries to focus on producing what they make efficiently Inefficient sectors will be squeezed out Sectors open to competition become more efficient and productive@? Ups and downs of globalizationAdvantages Productivity increases faster when countries produce according to comparative advantage Global competition and cheap imports keep prices low and inflation at bay An open economy encourages technological development and innovation with ideas from abroad Jobs in export industries pay more than those in import-competing industries Free movement of capital gives the US access to foreign investment and keeps interest rates low(  Ups and downs of globalizationDisadvantages Millions of US jobs lost to imports or production abroad; those displaced find lower-paying jobs Millions of other Americans fear getting laid off Workers face pressure for wage concessions under threat of having the jobs move abroad Service and white-collar jobs are joining blue-collar ones in being vulnerable to moving overseas US workers can lose their competitiveness when firms build state-of-the-art factories in low-wage countries, making them as productive as plants in the US(/l !"# $ % &  ` ^WN̙f` ^WNff3` 999MMM` ff33` ff33` ^WN̙f` ^WNfT>?" dd@(?wdd@  @" `  n?" dd@   @@``@n?" dd@  @@``PR   @ ` ` p>> ,(    0d_ &  T Click to edit Master title style! !<  s *0A /<$ 0  RClick to edit Master text styles Second level Third level Fourth level Fifth level!     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