IB 303 exam 1
· What is globalization? What are the main drivers? How has it changed the world?
correct answers - Globalization refers to the shift toward a more integrated and
interdependent world economy, it has many facets like globalization of markets and
production. Open flow of information (technology), capital, trade, people
- 2 Globalization drivers:
#1 declining trade and investment barriers; more firms offshoring, national economies
intertwined, world became wealthier
#2 Technology; communication and information processing, moores law (power of
technology doubling but price halves), internet of things... transportation;
containerization, private jets
**-World economy today- fewer self-contained economies, more integrated global
systems with lower barriers to trade and investment, distance and time zones easily
overcome, language differences solvable, and cultural differences and distances
shrinking.. there has also been increasing foreign direct investment
Be able to recognize examples of globalization of markets and production. correct
answers
Globalization of markets: correct answers refers to the merging of historically distinct
and separate national markets into one huge global market place. Everyone desires
something.
More selling international because of falling barriers to cross-border trade and
investment. Tastes and preferences are converging. Consumer products: Citi group,
Coca Cola, Sony video games, Mcdonalds hamburgers, Starbucks coffee, and apple
iphones are examples. Same products offered worldwide, creating global market.
NOT EVERYONE HAS THE SAME PREFERENCE, CONVERGENCE DOES NOT
MEAN EXACTLY THE SAME ESPECIALLY PRODUCTS
-Non-Consumer products are the most global of market: industrial; microprocessors,
software, memory chips, jet air craft. Commoditities; aluminum, oil, wheat, soybeans.
Financial Assets; US T-bills, Stocks, Bonds, Euros, Futures
Globalization of Production correct answers refers to the sourcing of goods and
services from locations around the globe to take advantage of national differences in
cost and quality of factiors of production (such as labor, energy, land, and capital)
-sourcing goods and service from global locations
-based on production factor cost and quality
-seeking competitive advantage, lower cost structures, product improvemen
Offshoring correct answers a firm on its own is accomplishing work in another country
, outsourcing: correct answers giving work to a third party, work is done by third party.
Ex: boeing outsourcing to foreign suppliers; eight Japanese suppliers make parts for
fuselage, doors, and wings. Other parts made in Singapore
Know the main drivers of globalization. What is moores law?
- (in first question)
power of technology doubling but price halves correct answers power of technology
doubling but price halves
- 2 Globalization drivers:
#1 declining trade and investment barriers; more firms offshoring, national economies
intertwined, world became wealthier
#2 Technology; communication and information processing, moores law (power of
technology doubling but price halves), internet of things... transportation;
containerization, private jets
**-World economy today- fewer self-contained economies, more integrated global
systems with lower barriers to trade and investment, distance and time zones easily
overcome, language differences solvable, and cultural differences and distances
shrinking.. there has also been increasing foreign direct investment
Recognize the Institutions that support globalization and the primary function of each.
correct answers continued
World Trade Organization (WTO)- correct answers - responsible for policing the world
trading system and making sure nation-states adhere to rules laid down in treaties
signed by WTO member states. Responsible for facilitating the establishment of
additional multi-national agreements among WTO member states. Ex from class: below
market costs-dumping, WTO manages that with trade
International Monetary Fund and World bank correct answers - both created in 1944 by
44 nations that met in Bretton woods, NH.
- IMF: established to maintain order in the international monetary system. Lender of last
resort to nation-states whose economies are in turmoil and whose currencies are losing
value against those of other nations. Took a proactive role in countries coping w 2008-
2009 finanical crisis. Their loans come w strings attached, however in return for loans,
IMF requires nation -states to adopt specific economic policies aimed at returning to
their troubled economies to stability and growth.
World Bank correct answers set up to promote economic development. It is less
controversial than IMF. It focuses on making low-interest loans to cash-strapped
governments in poor nations that which to undertake significant infrastructure
investments (such as building dams or roads)
United Nations (UN correct answers - committed to preserving peace through
international cooperation and collective security. Nearly evert nation today in the world
