GLOBALIZATIONWHAT DOES IT MEAN TO GLOBALIZE THE ECONOMY?

Comparative and Absolute Advantage

A country has an absolute advantage when it has the ability to produce more of a given product using a given amount of resources.

A country has a comparative advantage in the product that it can produce most efficiently given all the products it could choose to produce.

Is it possible to have an absolute advantage, but not a comparative advantage in producing a type of product or service?

Reasons for Trade Joe Mauer may be the best quarterback

in Minnesota. If Joe Mauer had an absolute advantage

in football and baseball, why did he choose to play baseball only?

Tiger Woods example.

Reasons for trade? Law of Comparative Advantage- A

nation is better off when it produces goods and services for which it has a comparative advantage. Each nation can then use the money it earns selling those goods to buy other goods that it cannot produce as efficiently.

Which products/services do you think it makes sense for the United States to produce?

Which might we want to trade for?

How Can Nations and People Resist Free Trade? Protectionism- the use of trade barriers to protect a

nations industries from foreign competition. Tariffs- a tax on imported goods

What effect would this have on the price of imported goods?

How would this effect the demand for imported products?

Subsidies-a government payment that supports a business, market or industry. How might subsidies effect products price? How do subsidies effect the demand for products?

Buy American “Buy American”- push for protectionist

policies in order to increase need for American production. The idea is that this would create jobs for working

class Americans and preserve industries vital to our national security and well being as a county.

Give arguments for and against this theory. Do you believe we should have had “Buy

American” provisions in our stimulus package? Explain your answer.

Possible drawbacks of Protectionist Behavior

Trade War- a cycle of increasing trade restrictions

Increased prices for foreign goods- most things are made with some foreign parts! Example Ipod

Decrease in competition reduces incentive for domestic producers to become more efficient, thus resulting in potential higher prices for domestic goods.

Buy American (led by consumers) “Buy American” Using Consumer

Sovereignty- As consumers we have consumer sovereignty. If there is no demand for imported products, businesses will stop importing them and turn to products produced in the US. Some believe this could increase employment opportunities in the US. Do you agree with this theory? Why or why not?

What does the article and the Ipod video indicate about the prospects of “Buying American”?

Arguments for Free Trade Trade benefits both countries and allows them to

specialize in what they do best. Increases efficiency and competition resulting in

lower prices for consumers. Increased choice for consumers. Protectionist policies may start trade wars which

limit opportunity for other industries and lead to higher prices for consumers.

Greater interdependence of nation states leads to reduction of likelihood of war between nation states

Argument Against Global Trade

Increased flow of skilled and non-skilled jobs from developed countries to developing nations. (Wal-Mart)

Race to the bottom- Business will look to take their production to places where there are little if any labor laws and extremely cheap labor. (Wal-Mart Video)

Spread of a Materialistic lifestyle and attitude that sees consumption as the path to prosperity. (Americanization)

Arguments Against Global Trade Eliminates cultural identity

(Mcdonaldization) Decreases in environmental integrity as

polluting corporations take advantage of a lack of environmental protections in developing countries (Environment Race to the Bottom).

Protect National Security- Steel, Agriculture etc…

Globalization In groups brainstorm answers to the following

questions What makes a country attractive to business

in a globalized world? Put a plus next to positive characteristics that

we posses as a country. Place a negative symbol next to traits that we do not have.

In which types of jobs do we possess a comparative advantage? Where do we not?

Globalization (Are We Ready?) During the video answer the following question

in your notebooks. Are we ready to compete in a global economy? Are we doing all we can to maintain our

comparative advantage? Why or why not? What can we do to improve and maintain our

comparative advantage? What actions need to be taken by

Government- Schools- Individuals-

The World is Flat Summarize the summary

Key points (Things we should discuss) Summary will be turned in for credit

Highlight vocabulary or concepts you don’t understand (Things you would like to ask a question about) Also will be turned in for credit

Globalization and Business What could we do to make our country

more attractive to business? As an individual, what can you do to

make yourself a more valuable or marketable asset to potential employers (How can you stand out in a “flatter” globalized world)?

GROSS DOMESTIC PRODUCT(GDP)

Gross Domestic Product (GDP) The dollar value of all final goods and services

produced within a country’s borders in a given year. Dollar value= selling price Final Goods and Services=Form sold to consumers. Produced Within a Country’s Borders=Cars made in

Ohio by a Japanese car company included. Cars produced in another country by US car company not included. This is important due to multinational companies existence.

Within a given year= Only things produced that year count. Example-house

Real vs Nominal GDP How much did a candy bar cost 50 years ago? Real GDP= measured in constant or unchanging

prices. Nominal GDP= GDP measured in current Prices Why would it be difficult to measure economic

growth from year to year using nominal GDP?Per Capita GDP= GDP divided by total population. Why is this an important measurement to

measure a country’s standard of living? What does it not tell you?