FHCE 5100 Study Guide - Spring 2018, Comprehensive Midterm Notes - Consumer Protection, Wic, Temporary Assistance For Needy Families
12 Oct 2018
School
Course
Professor
FHCE 5100
MIDTERM EXAM
STUDY GUIDE
Fall 2018
U.S. Markets And Market Failure In A Global Economy
NOTE:
− For thousands of years, most people lived, worked and died within a small radius of the place
where they were born
Globalization
− An umbrella term for a complex series of economic, social, technological, cultural and political
changes seen as increasing interdependence, integration and interaction between people and
companies in disparate locations
− Breaking don the national barriers
− It is not a new phenomenon, although it has accelerated over past years
Forces Leading to Globalization
1. Technology
• Computing and telecommunications
• Can almost instantly move funds from one country to another
2. Liberalization of Trade (free trade)
• Fewer barriers to trade across countries
• Ex: NAFTA and CAFTA (Central America)
3. Fragmentation of the production process
• Firms can move to locations with low wages and/or where customers are
Aspects of Globalization
1. Trade
• At the most basic level, trade is beneficial because it allows people to specialize in the
goods and services they produce best and most efficiently
• Patterns of trade are determined by variations in a number of factors, including climate,
the location of natural resources, and the skills and knowledge of the population
• Developing countries as a whole have increased their share of world trade; however, it
varies (U.S. and Asia have done well but Africa has done poorly)
• U.S. firms increasingly seek to expand production and profits through new export
opportunities
find more resources at oneclass.com
find more resources at oneclass.com
U.S. Markets And Market Failure In A Global Economy
2. Capital Movements
• What many people associate with globalization
• Private capital flows to developing countries
• Direct foreign investment has become the most important category
3. Movement of People
• Workers move to find better employment opportunities
• Most migration occurs between developing countries
• There is also the potential for skills to be transferred back to the developing countries and
for wages in those countries to rise
4. Spread of Knowledge (and technology)
a. Information exchange is an integral, often overlooking, aspect of globalization
b. Knowledge represents a highly valuable resource for the developing countries
Pros and Cons of International Trade
− One ie is that free trade is good
• Expanding to an international market leads to declining costs per unit
− Competition from foreign producers reduces market power of domestics
• Consumers gain from increased variety, quality and lower prices
− Countries with open trading systems grew twice as fast as those without
Absolute Advantage
− A country has an absolute advantage over its trading partners if it is able to produce more of a
good or service with the same amount of resources OR the same amount of a good or service with
fewer resources
− Ex: China can produce more goods than the U.S. for same amount of
money (Wal-Mart)
− IN GRAPH: Country A can produce 30m cars or 6m trucks & Country
B can produce 35 m cars or 21m trucks
− Country B has the absolute advantage in producing both products
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
For thousands of years, most people lived, worked and died within a small radius of the place where they were born. An umbrella term for a complex series of economic, social, technological, cultural and political changes seen as increasing interdependence, integration and interaction between people and companies in disparate locations. It is not a new phenomenon, although it has accelerated over past years. Information exchange is an integral, often overlooking, aspect of globalization: knowledge represents a highly valuable resource for the developing countries. One (cid:448)ie(cid:449) is that free trade is (cid:862)good(cid:863: expanding to an international market leads to declining costs per unit. Competition from foreign producers reduces market power of domestics: consumers gain from increased variety, quality and lower prices. Countries with open trading systems grew twice as fast as those without. Ex: china can produce more goods than the u. s. for same amount of money (wal-mart) In graph: country a can produce 30m cars or 6m trucks & country.
