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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

how do lower interest rates affect investment
meek Reply
which capital is best and why
Sanju Reply
outline 4 reasons why public corporation are establush
Ophelia Reply
how does the foreign currency rate affect to your needs and wants?
Donna Reply
a country can not produce everything so it needs to import some of those thing and once the currency rate becomes high we can not import as much as we can
Thembelihle
for instance let's say $1=R4 with R16 we can import more goods than when $1=R8
Thembelihle
Difference between needs and want?
Tijani Reply
what is a price mechanism
Johnny Reply
dis Is same as market market mechanism... it is the process by Wch a market solves a problem allocating resources especially deciding how much a good shld be produced
chimdindu
it is the shift of the demand curve to the left....which shows that less of a commodity is demanded
Sarpong Reply
yes
abhinav
sure
isaac
what is unemployment
Emma
yes
chimdindu
what is meant by a decrease or fall in demand
DUMBO Reply
Lower the demand i.e, lower the consumption
abhinav
dat is a shift in demand curve
chimdindu
what is industrialization
Santa Reply
Industrialization is the process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods. Individual manual labor is often replaced by mechanized mass production, and craftsmen are replaced by assembly lines.
abhinav
industrialisation is the period of social and economic change that transforms a human group from an agrarian society into an industry society..involving extensive reorganization of an economy for the purpose of manufacturing
Babakura
What is monopoly
Nancy Reply
monopoly is market structure
Atheef
monopoly is a market structure where there is only one producer or seller of a commodity
Johnny
monopoly is a market where there is only one seller
chimdindu
And the product has no substitute
Weeliems
is type of market where there are only one seller with no close substitute
Peter
has no substitute because only producer of the product in market
prem
thanks, its true
Peter
what's the summary meaning of economic
OSARETIN
what is money as used in economics
Fri Reply
store of value ,unite of account ,
Lydia
Money is any good that is widely used and accepted in transactions involving the transfer of goods and services from one person to another
abhinav
money is anything that is generally accepted by the citizens of the country to carry out the transactions of good and services for example CFAF which is generally accepted by the citizens of Cameroon to carry out good and services.
Fri
money is anything which is generally accepted by each and every person in order to purchase goods and services to fulfill his/her need or requirements
prem
money is anything dat is generally acceptable as a medium of exchange Nd settlement of debts
chimdindu
how those the government obtain economic objectives?
Santa Reply
how do commercial bank create credit
Santa Reply
commercial bank accept the deposit from the people and provide it to the needy person in the form of credit by keeping a part of deposit as reserve.
prem
how did bank see profit
Toheeb Reply
banks do see their profit in the interest that customers do pay when they receive lone from the Bank
Fri
banks get profit from loans, maintenance fees and charges for internet banking, etc.
Emmanuel
charges on bank transactions as well
Emmanuel
factors that cause abnormal demand curve
Samuel Reply
when the good is a luxurious good
Maxi
abt 5 cause
Samuel
when the good is outmoded.No matter how their prices are lower the dd. for them will be low
Johnny
seasonal goods such x-mas card during x-mas season
Maximilian
existence of some fixed assets, rising wages, target income, monopolistic practices
chimdindu

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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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