Thing about internal combustion engines to operate a

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Essentials of Economics
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Chapter 2 / Exercise 2
Essentials of Economics
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thing about internal combustion engines to operate a car—you just climb in and drive. Instead of trying to acquire all the knowledge and skills involved in producing all of the goods and services that you wish to consume, the market allows you to learn a specialized specialization: When workers or firms focus on particular tasks in the overall production process for which they are well-suited. economies of scale: When the average cost of producing each individual unit declines as total output increases.
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Essentials of Economics
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Chapter 2 / Exercise 2
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Chapter 1 The Interconnected Economy 5 set of skills and then use the pay you receive to buy goods and services. The economy is a social mechanism that coordinates this division of labor, specialization, and markets. The Rise of Globalization Recent decades have seen a trend toward globalization , which means that buying and selling in markets have crossed national borders to an increasing extent. As a result, firms and workers from different countries are increasingly interconnected. Globalization has occurred for a number of reasons. Improvements in shipping and air cargo have driven down transportation costs. Innovations in computing and telecommunications have made it easier and cheaper to manage long-distance economic connections of production and sales. Many valuable products and services in the modern economy can take the form of information—for example, computer software; financial advice; travel planning; music, books and movies; and blueprints for designing a building. These products and many oth- ers can be transported over telephone and computer networks at ever-lower costs. Finally, international agreements and treaties between countries have encouraged greater trade. Exhibit 1-1 presents one measure of globalization. It shows the percentage of domestic economic production that was exported for a selection of countries from 1970 to 2010. globalization: The trend in which buying and selling in markets have increasingly crossed national borders. EXHIBIT 1-1 The Extent of Globalization (export/GDP) One way to measure globalization is to look at the export/GDP ratio. For the world economy and for most individual countries, the export/GDP ratio has risen in recent decades. Country 1970 1980 1990 2000 2010 Some High-Income Countries United States 6% 10% 10% 11% 13% Canada 22% 28% 26% 46% 29% France 16% 21% 21% 29% 26% Japan 11% 13% 10% 11% 15% South Korea 14% 32% 28% 39% 52% Sweden 24% 30% 30% 47% 49% Some Upper-Middle-Income Countries Brazil 7% 9% 8% 10% 11% China 3% 11% 16% 23% 31% Mexico 8% 11% 19% 31% 30% Some Lower-Middle-Income Countries India 4% 6% 7% 13% 23% Nigeria 8% 29% 43% 54% 35% Some Low-Income Countries Bangladesh 8% 5% 6% 14% 18% Chad 16% 17% 13% 17% 39% Nepal 5% 12% 11% 23% 10%
6 Chapter 1 The Interconnected Economy Exports are the goods and services that are produced domestically and sold in another country; conversely, imports are the goods and services that are produced abroad and then sold domestically. The size of total production in an economy is measured by the gross domestic product, often abbreviated as GDP. (The details of how GDP is calculated are presented in Chapter 7.) Thus, the ratio of exports divided by GDP measures what

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