week 6

• What is the main focus of the course 38988 Principles of Economics and Finance?

  The nation and the world economy
• What are the key topics covered in the course?

  • Measuring Globalization
  • Specialization and Trade
  • Role of policies and institutions
• What typically happens during economic exchange?

  Gains are generated for both sides
• What can lead to conflicts in economic exchanges?

  Disputes over the distribution of gains
• What new complexities arise when goods and services cross national boundaries?

  Influence of government policies on trade
• What are some questions regarding globalization mentioned in the material?

  How can governments influence trade?
• What is one learning outcome of the course?

  Discuss the emergence of globalization
• What event is described as the grain price shock in Genoa?

  Offloading grain from India for the first time
• What was a significant factor that reduced the cost of moving agricultural commodities to Europe?

  The opening of the Suez Canal
• How did different countries react to the grain price shock?

  Countries imposed tariffs or adapted farming
• What is globalization defined as in the material?

  Integration of world economies via free flow
• What is offshoring?

  Relocation of a firm’s activities outside borders
• How does government policy influence trade fairness?

  Through tariffs, capital controls, and immigration policies
• What is the balance of payments?

  Records all economic transactions with the world
• What does the current account (CA) consist of?

  Exports minus imports plus net earnings
• What is the Law of One Price?

  A good should have the same price everywhere
• What does a large price gap indicate about globalization?

  Trade is expensive and globalization is limited
• What are the two waves of increasing global economic integration?

  Globalization I and Globalization II
• What happened during the deglobalization period from 1914-1945?

  Price gaps rose due to increased tariffs
• What is the impact of protectionist policies?

  They limit trade and make imports more expensive
• How did international capital markets behave in the 19th century?

  Significant globalization with large capital flows
• What is a CA deficit?

  When imports exceed exports, borrowing occurs
• What trend was observed in international asset holdings from 1900 to 2014?

  Increased steadily after a collapse in the 1920s
• What factors contributed to the decline in transport costs in the 19th century?

  Advancements in transportation technology
• How did immigration trends change from the 19th to the 20th century?

  Restrictive laws emerged during economic crises
• What is a significant barrier to labor market integration today?

  Immigration barriers and regulations
• What was the wage comparison between French and US workers in the late 1970s?

  French workers earned 80% of US wages
• What is the impact of varying levels of economic development on wages?

  Wages differ due to productivity disparities
• What is specialization in the context of global integration?

  • Production of specific goods/services
  • Involves trade between nations
  • Enhances efficiency and productivity
• What was the wage comparison between French workers and US workers in the late 1970s?

  French workers were paid 80% of US wages
• How did the wage situation change for French workers by 2012?

  They were paid 10% more than US workers
• Which European countries surpassed US manufacturing wages by more than 40%?

  Norway and Sweden
• What caused wages in South Korea and Japan to converge towards US wages?

  Industrial growth and productivity
• Which low-wage country fell further behind in wages?

  Mexico
• What factors contribute to wage differences across countries?

  Migration costs, economic development, regulations
• What is specialization in the context of international trade?

  • Production of distinct goods in specific areas
  • Example: Wine in France, software in Silicon Valley
• What is the relationship between specialization and international trade?

  • Specialization leads to trade
  • Countries exchange goods they do not produce locally
• What is comparative advantage?

  Lower cost of producing certain goods than another country
• How do economies of scale benefit production?

  Cost advantages from producing in large quantities
• What are economies of agglomeration?

  Cost reductions from locating near similar firms