Why well according to many thinkers its because of

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Unformatted text preview: pitalist” or “sot,” and countries that never communicated have become major trading partners. Why? Well, according to many thinkers, it’s because of globalization. So what is this thing called globalization? Many economists define it as a process by which individuals and businesses in any part of the world are much more affected by events elsewhere in the world than they used to be. Globalization can also be defined as the growing integration of the national economies of the world. Some believe that this integration may eventually lead to the existence of a single worldwide economy. Let’s take a closer look at some of the key features of globalization. A Smaller World The first definition of globalization emphasizes that economic agents (individuals, businesses, governments) in any given part of the world are affected by events elsewhere in the world. In other words, living in the United States, you are not only affected by what happens in the United States, but what happens in Brazil, Russia, and China. In 2005, the Chinese government was taking much of the money it earned in trade with the United States and buying bonds issued by the U.S. government. As a result of Chinese purchases of U.S. bonds, interest rates in the United States ended up being lower than they would have been. Are you affected by interest rates? Sure you are whenever you buy a car, a house, or anything else you take out a loan to purchase. EXAMPLE: globalization A phenomenon by which economic agents in any given part of the world are affected by events elsewhere in the world; the growing integration of the national economies of the world to the degree that we may be witnessing the emergence and operation of a single worldwide economy. Section 2 Globalization 41 02 (030-053) EMC Chap 02 11/18/05 4:39 PM Page 42 These financial workers are making and recording trades at the Tokyo Stock Exchange. Do you expect more or fewer Americans to buy and sell shares traded on this exchange in the years to come? Explain. Can you see how, in a sense, globalization makes the world smaller? China hasn’t moved physically; it isn’t any closer to the United States (in terms of distance) than it was 100 years ago. Still, what happens in China today, because of globalization, has the same effect on you as what might happen 10 or 100 miles away from you. For all practical purposes, we live in a “smaller world” today than people did 100 years ago. A Free Enterprise World Globalization is closely aligned with a movement toward more free enterprise, freer markets, more freedom of movement for people and goods. Thomas Friedman, author of several books on globalization, states that “globalization means the spread of free-market capitalism in the world.” There is no doubt that many countries are moving toward greater free enterprise practices. What does this trend mean for our study of economic systems? Speaking of various economic systems made sense when national economies were the most important economies....
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This document was uploaded on 01/16/2014.

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