Questions and Answers
What is the primary benefit of economic globalization?
The period before World War I is considered the 'golden age' of globalization.
True
What significant role does the World Trade Organization (WTO) play?
It provides a framework for international trade.
The system where a country's currency value is directly linked to gold is known as the ______.
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Match the following terms with their descriptions:
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Which of the following best describes economic globalization?
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The Gold Standard is still used by many governments around the world today.
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What was traded through the Galleon Trade from the Americas to Asia?
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What is the primary focus of globalism?
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Old regionalism was characterized by grassroots empowerment.
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What are the two classifications of regions in the context of economic development?
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The _____ regions are politically stable and economically dynamic.
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Match the following types of regional classifications with their characteristics:
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Which of the following is a feature of new regionalism?
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The Global North typically refers to regions with underdeveloped economies.
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Define regionalism in the context of economic globalization.
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_____ are regions created from interventions of superpowers during the Cold War.
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Which term best describes regions that experience political turbulence and economic dysfunction?
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Which type of integration involves acquiring a business that operates earlier in the supply chain?
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Conglomerate integration refers to the combination of firms involved in the same industry.
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What is the key characteristic of a transnational corporation (TNC)?
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A firm that conducts operations in several states and often has its headquarters offshore to defer taxation is called a(n) __________.
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Which of the following is an example of horizontal integration?
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Changes in one segment of market integration do not typically affect other segments.
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The increase in the number and size of TNCs has been significant in the __________ half of the past century.
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What is one reason for the growth of Transnational Corporations?
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Match the type of market integration with its description:
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Transnational Corporations primarily operate under one country's regulations.
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Name one benefit of Transnational Corporations.
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The act of __________ refers to the delegation of specific functions from the developed to the developing world.
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Match the scenarios of growth reasons with the provided examples:
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What is a disadvantage of Transnational Corporations?
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TNCs often bring in managerial positions from local talent.
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What is vertical integration in the context of Transnational Corporations?
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What system was agreed upon by 44 countries in July 1944?
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The Bretton Woods system ended when the US government continued to peg the USD to Gold.
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What economic condition characterized the period of stagflation during the early 1970s?
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Neoliberalism became the codified strategy of institutions like the US Treasury, the World Bank, and ____ from the 1980s onward.
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Match the following events with their descriptions:
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Which currency became the world currency during the Bretton Woods System?
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After the collapse of the Bretton Woods system, most major economies transitioned to a floating exchange rate system.
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What is the main characteristic of a floating exchange rate system?
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Study Notes
Market Integration
- Defined by McDonald as a system where economic processes are interconnected, forming a cohesive unit of production.
- Features interdependence between enterprises, states, and other actors; changes in one component impact all others.
Types of Market Integration
- Backward Vertical Integration: Involves acquiring businesses earlier in the supply chain (e.g., retailers buying wholesalers).
- Conglomerate Integration: Firms with unrelated activities combine (e.g., Disney acquiring ABC).
- Forward Vertical Integration: Involves purchasing businesses further along in the supply chain (e.g., car manufacturers buying parts distributors).
- Horizontal Integration: Combines businesses within the same industry operating at the same production stage (e.g., Intel and AMD collaborating).
Transnational Corporations (TNCs) and Outsourcing
- TNCs have increased in number and size significantly since the mid-20th century, comprising parent enterprises and their foreign affiliates.
- TNCs directly invest in multiple countries and control income-generating assets; differ from MNCs, which often keep headquarters offshore for tax benefits.
Bretton Woods System (1946-1971)
- Established in 1944 by 44 countries, it created an adjustable peg system for currency exchange, solidifying the USD as the world currency.
- Participants exchanged gold for USD, which facilitated international transactions.
Dissolution of the Bretton Woods System
- In 1971, the U.S. halted the gold-pegging of the USD, triggering stock market crashes and stagflation in 1973-74.
- Post-Bretton Woods era saw the rise of neoliberalism as the economic strategy, promoting free-market trade and government-enterprise cooperation.
Floating Exchange Rates System
- Operates with fiat currencies where currency value is determined by economic performance.
- Most major economies allowed currency to float freely after the Bretton Woods collapse.
Regions of the World
- Regions can be viewed geographically or economically, with a modern socioeconomic perspective.
Globalism vs. Regionalism
- Globalism: Advocates for a borderless world and top-down globalization.
- Regionalism: Focuses on cultural coherence, geography, and bottom-up initiatives.
Old vs. New Regionalism
- Old regionalism emerged during the Cold War, created by superpower interventions; new regionalism is grassroots-driven and outward-looking.
Global North vs. Global South
- Global North: Developed economies with stable democracies.
- Global South: Underdeveloped economies characterized by high poverty and political instability.
Structural Classification of States
- Core: Politically stable and economically dynamic.
- Periphery: Politically unstable and economically stagnant.
- Intermediate: Links closely with core regions, benefiting from their developments.
Economic Globalization
- Describes historical, technological progress that deepens economic interdependencies globally.
- Seen as an organic system that promotes international collaboration and peace.
International Trading Systems
- Encompasses numerous rules and agreements among nations facilitating trade and investments.
- The WTO serves as a central framework for international trade.
The Gold Standard (Middle Ages-1945)
- A monetary system where currency value was directly linked to gold, no longer in use.
Characteristics of Transnational Corporations
- Increasing size and number, seeking competitive advantages through low-cost production locations.
- Significant workforce exists in developing countries, with assets distributed globally.
Reasons for Growth of TNCs
- Expanding globally for major products (e.g., Coca-Cola, McDonald's).
- Acquisitions and mergers with foreign firms (e.g., Google and Android).
- Vertical and horizontal integration drives growth and diversification.
Benefits and Disadvantages of TNCs
- Positives: Increased employment, economic activity, technology transfer, local skills improvement.
- Negatives: Proliferation of low-skill jobs, profit repatriation, managerial positions filled by expatriates, health and safety corner-cutting.
Outsourcing
- The process of contracting external suppliers for services that were previously performed in-house.
- Involves delegating functions to the developing world, impacting economic activity.
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Description
This quiz explores the concept of market integration as defined by McDonald, focusing on its types and the role of transnational corporations. It covers backward and forward vertical integration, horizontal integration, and conglomerate integration. Test your knowledge on how these dynamics interconnect economic processes.
