Chapter 1, Problem 1SQ

To determine

Measurement of globalization on international economic integration.

Explanation of Solution

Globalization is the process of free trade across the borders. This means that globalization is the process of encouraging the international trade by eliminating the trade-distorting factors such as the tariffs, quotas, and so on between the countries. Thus, globalization tries to make the world market without borders and trade distortions. Economic integration due to globalization can be measured using three different approaches such as trade flows, factor movements, and convergence of prices of goods, factors, or production as well as the assets.

The trade flow includes the flow of goods and services between the economies. Thus, it will help to identify the dollar value of trade that the economy is engaging with its trading partners. The factor flow indicates the flow of labor and other factors of production between the economies, which also determine economic integration. The other important measure to calculate the international economic integration is similarity or convergence of prices in the countries. When the prices become converged, it means that globalization is successful in establishing the international economic integration. The impact can be measured by comparing the trade openness of the country with its GDP. Thus, globalization and the international economic integration can be measured in these three ways.

Economics Concept Introduction

Globalization:  Globalization is the process of growing interdependence of the world economies, cultures, and population, which are made possible through the trade between the countries.