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Sem 5 Prep
← Intl TradeThe international economy and the standard of living

Formulas for this chapter

Interdependence (trade openness)

Interdependence = (Imports + Exports) / GDP

Any question asking how dependent a country is on trade, or comparing two countries' reliance on it. Add the two flows; never net them, because that gives the trade balance instead.

Imports
Value of goods and services bought from abroad in the period
Exports
Value of goods and services sold abroad in the same period
GDP
Total value of all goods and services produced in the nation in a year

Growth of the trade-to-production ratio

New ratio = old ratio x (1 + trade growth) / (1 + production growth)

When a question gives separate growth rates for world trade and world production and asks what happens to interdependence. Divide the growth factors; subtracting the rates is only an approximation.

Trade growth
Annual growth rate of world trade, as a decimal
Production growth
Annual growth rate of world production, as a decimal
Step 3 of 22
The real wordsTheory

Period one: 1870 to 1914

Three periods of rapid globalization. Each has a driver and an ending, and both are marks.

1870 to 1914Driven by the industrial revolution and by the opening up of new sources of resources in the "regions of recent settlement". It brought millions of immigrants, vast amounts of foreign investment and increased production. It ended with the outbreak of the First World War in 1914.

Your note names the regions: the United States, Argentina and Australia, receiving immigrants and investment from England to produce food and raw materials for Europe.

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