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GLOBALIZATION
Globalization is the tendency of businesses, technologies, or philosophies to spread throughout the world, or the process of making this happen. The global economy is sometimes referred to as a globality, characterized as a totally interconnected marketplace, unhampered by time zones or national boundaries
ABSOLUTE ADVANTAGEAbsolute Advantage is when a country can produce more of a good than another country using the same quantity of resources
Investopedia video clip
EOC study guide
Globalization #
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ABSOLUTE ADVANTAGE
Example: U.S. can produce 1,000 tons of wheat in a week Japan can produce 100 tons of wheat in a week
In this case, who has the absolute advantage in wheat production?
US!
COMPARATIVE ADVANTAGEComparative Advantage is specializing in the production of a good it can produce at a lower opportunity cost.
Investopedia video clip
EOC study guide
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BENEFITS OF TRADE
Comparative Advantage video
QUIZ
What is the definition of opportunity cost?a) The money you spend to buy something.b) The next best alternative that you give up.c) The chance that you will lose your money.d) All of the choices you could have made but didn't.
QUIZ
What is the term to describe when a nation or individual can produce a good or service at a lower opportunity cost than another nation or individual?a) Specializationb) Tradec) Opportunityd) Comparative Advantage
QUIZ
What does comparative advantage
measure?a) How much it costs to produce a good or service.b) How many resources a nation has.c) How much each nation gives up in one good to produce
another good.d) None of these options
COMPARATIVE ADVANTAGE
When country A produces 1 unit of wheat, they give up producing ½ a TV. In other words, Country A’s opportunity cost is ½ a TV.
When Country A produces 1 TV, the opportunity cost is 2 units of wheat.
What are Country B’s opportunity costs?
Production PossibilitiesCountry A Country B
Wheat
200 50
TVs 100 50
FRIDAY
Who has absolute advantage in fish?
FridayWho has absolute advantage in coconuts?
FridayWhat is Crusoe’s opportunity cost of catching a fish?
10 coconutsWhat is Friday’s opportunity cost of catching a fish?
15 coconutsWhat is Crusoe’s opportunity cost of picking a coconut?
1/10 of a fishWhat is Friday’s opportunity cost of picking a coconut?
1/15 of a fish
ROBINSON CRUSOE
THE WORLD ENDS UP WITH MORE
Everyone Wins With Trade!
COMPLETE WORKSHEET CH 15 SEC 1
ATK TIME!
Trade creates wealth
INTERNATIONAL COOPERATION AND AGREEMENTS
International trade agreements can lead to international prosperity and peaceful relationships
North American Free Trade Agreement, NAFTA eliminated trade barriers between US, Canada, and Mexico
Signed by President Bill Clinton in 1994 the overall value of intra-North American trade has more than tripled since the agreement's inception
EOC study guideGlobalization #5
INTERNATIONAL COOPERATION AND AGREEMENTS CONT. European Union, EU
over 28 member nationscreates free-trade zones that reduce or eliminate trade barriers
created a single currency
EOC study guideGlobalization #6
INTERNATIONAL COOPERATION AND AGREEMENTS CONT. World Trade Organization, WTO
negotiates new trade agreements resolves trade disputes
From 1930-1995 the average tariff in the US dropped from 59% to 5%
EOC study guideGlobalization #8
CAUSES OF ECONOMIC GROWTH? Little to no government debt
Low taxes and tariffs invite immigrants
Increase in productivity
EOC study guideGlobalization #10
ORGANIZATIONS WORKING TO RAISE THE STANDARD OF LIVING IN MAJORITY COUNTRIESWorld Bank
Aims to reduce poverty in middle-income and poorer countriesProvide low-interest loans and grants for
Education Health Infrastructure Agriculture
Primarily a development institution
EOC study guideGlobalization #9
ORGANIZATIONS WORKING TO RAISE THE STANDARD OF LIVING IN MAJORITY COUNTRIESInternational Monetary Fund (IMF)
Seeks to maintain an orderly system of payments and receipts between nations.
Ensure the stability of international monetary system (exchange rates)
Facilitate international tradeEOC study guideGlobalization #7