2.6 The Global Context

• The spread of technology and ideas through globalization boosts economic growth.
• How do technological advancements contribute to globalization?

  Lower communication costs
• How does international trade contribute to economic growth?

  Specialization and higher productivity
• Foreign exchange markets influence the value of exchange rate systems.


  True
• Order the key factors driving globalization:

  1️⃣ Technological Advancements

  2️⃣ Trade Liberalization

  3️⃣ Reduced Transportation Costs

  4️⃣ Institutional Reforms
• Globalization facilitates the diffusion of innovation and best practices
• Increased trade and capital flows lead to higher productivity and living standards
• What is international trade defined as in macroeconomics?

  Exchange of goods and services between countries
• Match the exchange rate system with its definition:

  Fixed ↔️ Currency value is pegged to another currency

  Floating ↔️ Currency value is determined by market forces
• What are the two primary accounts of the balance of payments?

  Current Account and Capital and Financial Account
• FDI is generally more stable than portfolio investment because it is long-term in nature
• Both international capital flows and FDI can create opportunities and challenges for a country's macroeconomic stability.


  True
• Increased competition from globalization can lead to job losses in less competitive industries.


  True
• Match the factor driving globalization with its effect:

  Trade Liberalization ↔️ Increased cross-border trade

  Reduced Transportation Costs ↔️ Affordable international goods

  Institutional Reforms ↔️ Conducive environment for global activity
• Increased competition from imports can help control inflation.


  True
• What is a characteristic of a fixed exchange rate system?

  Currency value is pegged
• What is one effect of international trade on employment?

  New export-oriented jobs
• What is a potential negative effect of increased competition from globalization?

  Job losses
• The spread of technology and ideas through globalization boosts economic growth.


  True
• Trade allows countries to specialize in producing goods they can make most efficiently
• What is a drawback of a fixed exchange rate system?

  Limited monetary policy control
• Match the account in the balance of payments with its transactions:

  Current Account ↔️ Trade of goods and services

  Capital and Financial Account ↔️ Direct investment
• International capital flows and FDI can both boost economic growth but also pose challenges for policymakers.

  True
• What does globalization refer to?

  Increasing integration and interdependence
• Globalization has transformed the global economic landscape, creating both opportunities and challenges for policymakers.


  True
• Nations should focus on producing goods where they have a relative cost advantage.advantage
• The Balance of Payments consists of the Current Account and the Capital and Financial Account.


  True
• The Balance of Payments is crucial for assessing a nation's economic stability and global interactions.


  True
• Order the transactions recorded in the Capital and Financial Account:

  1️⃣ Capital transfers

  2️⃣ Foreign direct investment

  3️⃣ Foreign portfolio investment
• Globalization refers to increasing integration and interdependence of nations
• Globalization can exacerbate existing income inequalities
• What is a fiscal policy limitation for developing countries due to globalization?

  Pressure to offer tax incentives
• Match the organizations with their key roles in globalization:

  WTO ↔️ Promotes free and fair trade

  IMF ↔️ Stabilizes global financial system

  G20 ↔️ Coordinates global economic policies

  UN ↔️ Facilitates global governance
• What is the effect of increased trade and capital flows on countries?

  Higher productivity and living standards
• Globalization is driven by technological advancements, trade liberalization, reduced transportation costs, and institutional reforms.
• International trade refers to the exchange of goods and services between countries.
• The exchange rate influences the volume and direction of trade flows.
• Match the exchange rate system with its benefits and drawbacks:

  Fixed Exchange Rate System ↔️ Stability, limited monetary policy control

  Floating Exchange Rate System ↔️ Flexible monetary policy, volatility
• What does globalization allow countries to specialize in?

  Trade
• What is globalization defined as in macroeconomics?

  Increasing integration and interdependence