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Managerial Economics - Essay Example

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One of the best articles that have discussed the importance of International Trade in World Market has been published in New York Times magazine which has highlighted the importance of trade agreements in this globalization period (International Trade, 2012). …
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Managerial Economics
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Download file to see previous pages The trade agreements have reduced prices of goods and services of America in foreign markets and also in the home country; tariffs and taxes on these products have been eliminated to a considerable extent. Overall benefits because of globalization are numerous but the major one is surging demand of products and services along with reduction in their prices. As a result of globalization and trade agreements, foreign goods are available at cheaper prices and more American workers are losing their job as labor cost is rising at an accelerating pace. Globalization Globalization has helped in easing up trade between countries as it allows exchange of information, products, resources, services and markets at international level and gives organizations the opportunity of interacting with markets present in different countries. According to globalization theory, cited by Rogers and Hyatt (2012), there are about six processes of globalization that are dynamic and interdependent such as: 1. Increase in economic dependence across the world 2. Dramatic rise in exchange among countries on cultural, economical and resources level. 3. Breakthrough innovations in technological field allow quick access to important and new ideas and information. 4. Space and time has been compressed. 5. Institutions and events have been disembodied that allow restructuring and realignment of interaction on social level across time and space. 6. Reflexive processes have increased global consciousness. Hence, government policy makers have to take into account the factors that are impacting globalization as it has become an important part of every economy. In addition, many governments have changed their policies to support Foreign Direct Investments within their countries so that economy gets boosted (Castle, 2012). Trade Agreements – Protectionism or Deregulation Trade Agreements are being done on an increasing rate among countries to cope up with the recession that has significantly impacted their economies. According to some researchers, Trade Agreements have helped in taking advantages of benefits being offered to each party; on the other hand, some critiques have argued that it poses threat to local manufactures and service providers (Shah, 2010). In economic policy, protectionism is used to create some restrain in trade through various measures like regulations, quotas and tariffs; it is used in discouraging certain goods imports and give protection to domestic markets as well. On the other hand, deregulation is done to have free economic activity that is free from binding rules of the state; the main idea of this attempt is to boost competition in the country (Labonte, 2010). Some critics have referred to protectionism as a barrier to free trade as it makes certain industries eligible for subsidization that means competition reduces to a greater extent as everyone is treated on an equal basis. However, deregulation allows easy trading amongst countries and motivates domestic producers to contribute more in its respective economy. Inflation Inflation is described as increase in price of goods and services (Amadeo, 2012). When inflation is increased, individual’s standard of living falls considerably; each dollar spent for purchasing will buy less amount of thing being bought and more money will be required to get hold of same goods and services. When the inflation is mild, it can significantly impact the economic growth of a country. Healthy economy is one in which prices rise slowly and gradually so that future increase in prices can be avoided. All government policies have to ensure that inflation is controlled so that prices of goods and serv ...Download file to see next pagesRead More
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