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ECON 3100- Clemson Questions with Complete Solutions
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ECON 3100- Clemson Questions with Complete Solutions
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ECON 3100- Clemson Questions with Complete SolutionsGlobalization - -increasing interaction of people, companies, states or countries
-through the growth of international flows of people, culture, money, goods and ideas
-in the economic sphere it's also called international economic integration
Globalization: First Wave - -1870 - 1913 (< WWI)
-New technologies
-Transportation costs DOWN
--Steam-powered ships, railroads, telegraph...
--Also had large flows of goods and FDI
Globalization: Second Wave - Post-WWII
-New technologies
--Transportation costs DOWN
---Internet, container ships...
-Differences
--Trade in services
--Non-FDI financial flows
--Trade in currency
Global Economic Integration - Can be separated into 3 areas 1.Trade integration
2.Financial integration 3.Migration
> Lead to equalization
of prices
1. Trade integration - Trade-to-GDP ratio:
( X + M ) / GDP
, -Measures of how much you trade (eXport and iMports) relative to the size of your
economy (GDP)
Over time, we see a steady increase in trade in both goods and services
-World is becoming more integrated, especially after the 70s
-High income countries all tend to trade a lot
-But larger countries tend to have a smaller trade-to-GDP ratio: why?
2. Financial integration - worldwide flows of capital
-Foreign Direct Investment:
-Portfolio investment
-Capital flows are savings of one country that are invested in another
--High savings countries tend to have high investment, and low savings implies low
investment.
--Dangerous to completely depend on others for their investment funds. Why?
-Financial flows have greatly increased in recent decades
--Transaction costs have decreased dramatically
--Slew of new financial instruments
Foreign Direct Investment: - -Incoming FDI: Foreign entity acquires physical investment
goods in your country (e.g. factories) with the aim of producing goods/services
-Outgoing FDI?
Portfolio Investment - Purchases of bonds and stocks for speculation i.e. because you
think it will increase in value.
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