Globalization is the tendency of businesses, technologies, or philosophies to
spread throughout the world, or the process of making this happen. The global
economy is sometimes referred to as a globality, characterized as a totally
interconnected marketplace, unhampered by time zones or national boundaries
ABSOLUTE ADVANTAGE
 Absolute Advantage is when a country
can produce more of a good than another
country using the same quantity of
resources
 Investopedia video clip
ABSOLUTE ADVANTAGE
 Example:
 U.S. can produce 1,000 tons of wheat in a week
 Japan can produce 100 tons of wheat in a week
In this case, who has the absolute advantage in wheat
production?
US!
COMPARATIVE ADVANTAGE
 Comparative Advantage is specializing in
the production of a good it can produce at a
lower opportunity cost.
 Investopedia video clip
 Comparative Advantage video
 What is the definition of opportunity cost?
a)
b)
c)
d)
The money you spend to buy something.
The next best alternative that you give up.
The chance that you will lose your money.
All of the choices you could have made but didn't.
 What is the term to describe when a nation or individual
can produce a good or service at a lower opportunity cost
than another nation or individual?
a)
b)
c)
d)
Specialization
Trade
Opportunity
Comparative Advantage
 What does comparative advantage
a)
b)
c)
d)
measure?
How much it costs to produce a good or service.
How many resources a nation has.
How much each nation gives up in one good to produce another
good.
None of these options
COMPARATIVE ADVANTAGE
Production Possibilities
Country A
Country B
Wheat 200
50
TVs
100
50
 When country A produces 1 unit of wheat, they give up producing ½
a TV. In other words, Country A’s opportunity cost is ½ a TV.
 When Country A produces 1 TV, the opportunity cost is 2 units of
wheat.
 What are Country B’s opportunity costs?
THE WORLD ENDS UP
WITH MORE
ATK TIME!
Trade creates wealth
 International trade agreements can lead to international prosperity
and peaceful relationships
 North American Free Trade Agreement,
NAFTA
 eliminated trade barriers between US, Canada, and
Mexico
 Signed by President Bill Clinton in 1994
 the overall value of intra-North American trade has
more than tripled since the agreement's inception
EOC study guide
Globalization #5
 European Union, EU
 over 28 member nations
 creates free-trade zones that reduce or
eliminate trade barriers
 created a single currency
EOC study guide
Globalization #6
 World Trade Organization, WTO
 negotiates new trade agreements
 resolves trade disputes
 From 1930-1995 the average tariff in the US
dropped from 59% to 5%
EOC study guide
Globalization #8
 Little to no government debt
 Low taxes and tariffs invite immigrants
 Increase in productivity
EOC study guide
Globalization #10
 World Bank
 Aims to reduce poverty in middle-income
and poorer countries
 Provide low-interest loans and grants for
 Education
 Health
 Infrastructure
EOC study guide
Globalization #9
 Agriculture
 Primarily a development institution
 International Monetary Fund (IMF)
 Seeks to maintain an orderly system of
payments and receipts between nations.
 Ensure the stability of international
monetary system (exchange rates)
 Facilitate international trade
EOC study guide
Globalization #7
 Get with a partner and read through pages 46-50 in the
textbook.
 Create a two columned list describing the
of globalization
 You
MUST
benefits and costs
EXPLAIN----GIVE
EXAMPLES