Chapter 1 - International economics and the global economy. After completing this chapter, students will be able to: Explain why economists use models, define globalization, describe the current level of globalization, encourage curiosity about why globalization occurs, encourage students to think about the future course of globalization, introduce the remainder of the book. | International Economics and the Global Economy To most economists, the evidence is impressively persuasive that the dramatic increase in world competition–a consequence of broadening trade flows–has fostered markedly higher standards of living for almost all countries that have participated in cross-border trade. (Alan Greenspan) The Goals of This Chapter Explain why economists use models Define globalization Describe the current level of globalization Encourage curiosity about why globalization occurs Encourage students to think about the future course of globalization Introduce the remainder of the book The Three Components of Globalization International trade International investment International migration What Is an Economic Model? Simplified representation of reality Logical representation of economic activity Focuses on relationships that are important for a particular issue Omits details deemed less relevant to the issue at hand Models are sometimes referred to as theories or paradigms Types of Models The textbook will use four categories of models General equilibrium models Partial equilibrium models Static models Dynamic models These four categories are not mutually exclusive General and partial equilibrium models can be static or dynamic The Analytical Approach of the Textbook Examine globalization’s partial and general equilibrium effects Examine globalization’s domestic and foreign effects Examine globalization’s static and the dynamic effects The Extent of Globalization Fewer than 2 out of 100 people immigrate during their lifetimes The Extent of Globalization Trade is less than 20% of world GDP Figure . Exports/Production: 1879 - 1997 Source: . Bureau of the Census How Will Globalization Evolve in the Future? The world has achieved unprecedented levels of international economic integration The effects of international trade, investment, and migration are easily recognizable throughout nearly all economies It is still not clear, however, . | International Economics and the Global Economy To most economists, the evidence is impressively persuasive that the dramatic increase in world competition–a consequence of broadening trade flows–has fostered markedly higher standards of living for almost all countries that have participated in cross-border trade. (Alan Greenspan) The Goals of This Chapter Explain why economists use models Define globalization Describe the current level of globalization Encourage curiosity about why globalization occurs Encourage students to think about the future course of globalization Introduce the remainder of the book The Three Components of Globalization International trade International investment International migration What Is an Economic Model? Simplified representation of reality Logical representation of economic activity Focuses on relationships that are important for a particular issue Omits details deemed less relevant to the issue at hand Models are sometimes referred to as theories or
