Structures of Globalization

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Questions and Answers

Which scenario best exemplifies the concept of economic globalization?

A government subsidizing local farmers to ensure food security within its borders.
Two neighboring countries agreeing to lower trade barriers and increase cross-border investments.
A large corporation relocating its production facilities to a country with lower labor costs and exporting the finished goods globally. (correct)
A country imposing strict tariffs on imported goods to protect local industries.

How did the Bretton Woods system aim to stabilize the global economy after World War II?

By pegging currencies to the U.S. dollar, which was in turn linked to gold, fostering stable international exchange rates. (correct)
By establishing a floating exchange rate system based on market demand.
By promoting import substitution policies in developing countries.
By creating a global central bank to control monetary policy across nations.

What was a primary reason for the failure of the International Trade Organization (ITO)?

The rise of regional trade agreements that undermined its authority.
Insufficient enforcement mechanisms to resolve trade disputes.
Lack of participation from developing countries.
The United States' lack of support due to concerns over sovereignty and control over trade policies. (correct)

How does the concept of 'race to the bottom' relate to global trade and investment?

Countries competing to attract investment by lowering wages, taxes, and regulations, potentially leading to exploitation. (C) Signup and view all the answers

Offshore outsourcing significantly impacts the global economy by:

Allowing companies to reduce costs by contracting work to companies in other countries, influencing both economic and non-economic sectors. (D) Signup and view all the answers

What is the most accurate description of how global commodity chains create value?

Following the process of creation, production, and distribution of a product until its final disposal, adding value at different stages. (A) Signup and view all the answers

How does international finance differ from international trade in its impact on the global economy?

International finance involves the transfer of money at a faster rate than goods or services, making it a key feature of the global economy. (C) Signup and view all the answers

Which of the following describes the role of the General Agreement on Trade in Services (GATS) within the World Trade Organization (WTO)?

To extend multilateral trade rules to the service sector, liberalizing trade in services among member countries. (D) Signup and view all the answers

In what way does the World Trade Organization (WTO) differ from the General Agreement on Tariffs and Trade (GATT)?

The WTO is a formal organization with enforcement powers, while GATT was primarily a forum for negotiations. (A) Signup and view all the answers

What is the main goal of Trade-Related Investment Measures (TRIMs) agreements?

To ensure foreign firms do not distort trade in goods and services in host countries. (B) Signup and view all the answers

What critical role does microeconomics play in understanding the impact of the global economy?

It provides insights into how individual decisions impact market dynamics, resource allocation, and the wealth distribution in the global economy. (A) Signup and view all the answers

Which of the following best describes the concept of 'global investment'?

An investment strategy that is not constrained by geographical boundaries, taking place via foreign direct investment (FDI). (D) Signup and view all the answers

How has the increase in the world's population impacted emerging markets?

It has led to emerging markets growing economically, which makes them one of the primary engines of world economic growth. (D) Signup and view all the answers

What is the significance of free trade in the context of the global economy?

It is essential for countries to exchange goods and services, allowing countries to specialize in the production of those goods in which they have a comparative advantage. (D) Signup and view all the answers

What is the role of International Finance Institutions in the International Market?

They provides opportunity to expand market coverage by selling local products in the global market. (B) Signup and view all the answers

How does the movement of labor impact global economic dynamics?

It can reduce geographical inequality as workers look for jobs in other countries during times of high unemployment. (D) Signup and view all the answers

How do multinational corporations (MNCs) impact the sovereignty of national economies?

By potentially influencing government policies and regulations due to their economic power and global reach. (D) Signup and view all the answers

What is the primary defining characteristic of Transnational Corporations (TNCs)?

Operates substantial facilities and conducts business in more than one country, with centralized control from parent companies. (D) Signup and view all the answers

What is the key factor of intergovernmental organizations that sets them part from other international groups?

They are primarily composed of sovereign states and established by treaties, giving them international personality. (B) Signup and view all the answers

Which of the following demonstrates the concept of International Trade aspect?

International trade is helping countries to specialize in products in which they have a comparative advantage in. (D) Signup and view all the answers

What role did the Marshall Plan play in the post-World War II global economy?

It provided massive US aid for European post-war recovery, diminishing the initial role of the World Bank. (B) Signup and view all the answers

What differentiates Foreign Direct Investment (FDI) from foreign portfolio investment?

FDI involves a controlling ownership in a business, while portfolio investment does not. (B) Signup and view all the answers

In the context of economic globalization, what does 'trade liberalization' involve?

Removal or reduction of restrictions and barriers on international trade. (A) Signup and view all the answers

Which organization is primarily responsible for global macroeconomic stability?

International Monetary Fund (IMF). (B) Signup and view all the answers

What is the primary goal of the General Agreement on Trade and Tariffs (GATT)?

To facilitate the liberalization of trade by the reduction of tariff barriers. (C) Signup and view all the answers

Why global corporations spend huge amounts of money on marketing, advertising and promotional activities?

To target international audience. (A) Signup and view all the answers

In what way is the Brandt Line significant in the study of the global economy?

It represents the separation that divides the rich north from the poor south. (D) Signup and view all the answers

How does regional integration foster stability and wealth?

Through cooperating to achieve peace and stability among each other. (A) Signup and view all the answers

How does an increase in the complexity of social activity impacts coordination?

Coordination increases. (A) Signup and view all the answers

What strategies do countries employ to stimulate trade and investment?

Low prices and Low wages. (D) Signup and view all the answers

What is the role of the World Bank in the international system?

To fund programs in middle-income and creditworthy poorer nations. (B) Signup and view all the answers

An organization that includes 184 nations and works to maintain macroeconomic stability and economic collaboration is the:

International Monetary Fund. (C) Signup and view all the answers

According to the World System Theory, What describes social systems?

World System. (D) Signup and view all the answers

What are Trade-Related Aspects of Intellectual Property Rights (TRIPS)?

Intangible ideas, knowledge, and expressions, like movies, books, and computer software. (D) Signup and view all the answers

How do global companies or MNCs operate?

They have unity control. (C) Signup and view all the answers

How does the market development integration increase the economy?

Market integration reduce market failure. (B) Signup and view all the answers

Considering the dynamics of global trade, which of the following strategies would be MOST effective for a developing country aiming to transition from merely exporting raw materials to producing higher-value products?

Attracting Foreign Direct Investment (FDI) in technology-intensive sectors while simultaneously investing in education and infrastructure to enhance local capabilities. (B) Signup and view all the answers

How did the establishment of the Bretton Woods system influence the trajectory of economic globalization in the post-World War II era?

By creating a framework for international monetary cooperation and stable exchange rates, facilitating increased trade and investment flows. (C) Signup and view all the answers

What is the primary distinction between how intergovernmental organizations (IGOs) and supranational organizations impact state sovereignty in the global economy?

IGOs enhance state sovereignty by pooling resources for common goals, while supranational organizations require member states to cede some decision-making authority. (D) Signup and view all the answers

Considering the criticisms leveled against the World Trade Organization (WTO), which of the following scenarios would MOST likely be cited as evidence supporting claims of unfair practices?

The WTO's dispute settlement mechanism ruling in favor of a developed nation in a trade dispute involving environmental regulations imposed by a developing country. (D) Signup and view all the answers

How does offshore outsourcing affect the distribution of economic opportunities and challenges between developed and developing countries?

It allows developed countries to specialize in high-skill, high-wage jobs while creating employment opportunities in developing countries through lower-skill, lower-wage jobs. (C) Signup and view all the answers

Flashcards

Economy

The underlying structure on which societal activities are based; influences society and politics.

Galleon Trade

An economic relationship where the Philippines traded with China.