1. Why are certain products made in the Philippines while others are produced abroad?2. What sectors shape and influence the global economy’s operation? How do they interact with each other?3. How did the world transition from the gold standard to the Bretton Woods system? What was its immediate impact?4. According to Wallerstein’s world-systems analysis, to what group does the Philippines belong? Is his analysis reflective of current Philippine conditions? Explain.Photos for some reference in Question 2-4. • Under globalization, the global economy's operation is shaped andInfluenced by governments, global or multinational corporations (MNCS),and global institutions - the very same sectors that laid the foundationsof contemporary market integration.o Governments function as leading policymakers and implementersof globalization's tenets.O Global institutions are also partly managed and funded bygovernments and their representatives.o Meanwhile, global corporations ensure a leading role in making thecogs of capitalist globalization operate as smoothly, efficiently, andprofitably as possible.• World War 1, the crisis years of 1930s (the Great Depression), and WorldWar 2 devastation helped lay the rationale for the founding of the BrettonWoods system which replaced the gold standard and aided capitalistcountries toward achieving closer economic integration. This system isthe precursor to the current global economic setup.NETTON KOCDS10TA ONRINCE. n 1944, 44 capitalist countries led by the US met at Bretton Woods, atown in New Hampshire, resulting in agreements that "created anInternational basis for exchanging one currency for another. It also led tothe creation of the International Monetary Fund (IMF) and the InternationalBank for Reconstruction and Development, now known as the World Bank(WB).o International Monetary Fund (IMF)- designed to monitor exchange rates and lend reserve currenciesto nations with trade deficitso World Bank (WB)- designed to provide underdeveloped nations with needed capitalwith the member-nations contributing "a membership fee, to fundthese institutions; the amount of each contribution designated acountry's economic ability and dictated its number of votes• The Bretton Woods system further stimulated international trade andfinanced postwar reconstruction as:o the member states agreed to fix their exchange rates by tying theircurrencies to the US Dollar. American politicians, meanwhile,assured the rest of the world that its currency was dependable bylinking the US dollars to gold; $1 equaled 35 oz. of bullion. Nationsalso agreed to buy and sell dollars to keep their currencies at 1% ofthe fixed rate. And thus the golden age of the US dollar began."• From then on, the US dollar became the world's leading internationalcurrency. With the IMF and the WB both under its control and influence, USdominance in the capitalist world remained undisputed until Chinaoutperformed the former in terms of Gross Domestic Product (GDP). Thisglobal economic system remains intact, though not immune to variouscrises such as the Asian financial crisis in the 1990s and the internationalcrisis in 2008.• Immanuel Wallerstein's world-systems theory is vital in understanding theseemingly innate instability of the global capitalist economy. His "WorldSystems-Analysis" puts: Cheap Labor and Raw MaterialsConsumption Goodso "emphasis on the unit of analysis - a world system rather than aState/Society/Social formation. The word 'world' is not intended tobe synonymous with global or planetary but simply to refer to arelatively large unit within which there is an axial division of labor.We are talking of 'a' world, not 'the' world."This is how Wallerstein's World Systems Theory Model looks like:High ProftSemi-PeripheryPeripheryCOREEvery "world" or "large unit" of countries is composed of a core and aperiphery.o Core Regions/Countries- engage in innovative, capital-intensive production thatrequires higher and more specialized labor and professionalskills (e.g. microchip production or pharmaceuticals)typically treat their peripheries as sources of raw materialsand laborers, and as markets for their surplus products.Hence, the economies of core regions/countries seeminglygrow at the expense of peripheral regions/countries.o Peripheral Regions/Countriestake partlevel skills, usually involving the mere extraction and/orlabor-intensive production that requires only low-preliminary processing of resources (e.g. mining or copraproduction)seemingly made permanently dependent on the coreregion/countries as they failtheir natural resources for industrialization and achievingcapability in production and innovation that require higherlevels of labor and profeo or are hindered from usingonal skillso Semi-peripheral countriesSome regions or countries can also be labeled as semi-peripheral countries if they share some characteristics ofcore and a peripheral region/country, or if they serveas a core to one region/country, while at the same timeserving as a periphery of another region/country.both• If the world will be considered as a world system, the industrializedcountries of the West (such as the US and those in Western Europe) andsome industrialized countries of Asia (such as Japan and South Korea)are core countries; while most of the industrializing or non-industrializednations in Asia, Africa, and Latin America are peripheral countries.Meanwhile, Southern European countries (such as Greece, Spain, andPortugal) are semi-peripheralcountries.

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC