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CHAPTER 1: INTRODUCTION TO INTERNATIONAL ECONOMICS - Coggle Diagram
CHAPTER 1: INTRODUCTION TO INTERNATIONAL ECONOMICS
Globalization
happens to keep economy striving
It is a worldwide economic integration
process that removes the barriers, enabling free
trade, movement of capital & diffusion of
knowledge & information among countries.
which leads to an increase in interdependence of national, regional & local economies across the world.
Due to this, ANTI-GLOBALIZATION MOVEMENT happens. It claims globalization sacrifices human & environmental well-being to corporate profits of the MNCs.
Globalization is blamed for:
World poverty & child labor in poor countries
Job losses & lower wages in rich countries
Environmental pollution & climate change
GRAVITY MODEL
Predicts that the volume of trade is directly related to the GDP of each trading partner &
inversely related to distance between them
The greater the distance between the two
countries, the smaller is their bilateral trade.
The larger (and more equal in size) & the
closer the two countries, the larger volume
of trade between them is expected.
Reasons
Geography
ocean harbors, lack of mountain barriers makes it easier for transportation
Cultural affinity
formalities takes time. the existence of borders includes existence of diff languages & currencies.
Distance
between market influence transportation cost(import&export)
also influence personal contact & communication.
PROBLEMS & CHALLENGES
•Economic & financial crisis
more people migrates leads to having difficulty to obtain adequate healthcare, unable to feed their families (for having less living wage) and in the end, committing suicide
•Trade protectionism
leads to slower down the overall growth & its competitiveness
•Excessive fluctuations & misalignments in exchange rates
•Deep poverty in many developing countries
•Resource scarcity,
environmental problems such as harmful chemical ,global warming, depletion of natural resources
Infant industries will be affected
Unfair trade practices
Dumping
Domestic employment issue
Deficit in BOP
BENEFITS OF TRADE
Varieties of goods and services
makes life better
creating overall wealth
benefits countries in increasing output
sharing knowledge & technology
generate higher income