National economies are linked to each other through

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INTRODUCTION
National economies are linked to each other
through international trade in goods and
services, international flows of money,
international movements of labor, business
enterprise, and technology.

The U.S has become increasingly integrated to the
rest of the world. Figure 1.1 Exports and
Imports as Percentage of U.S. National Income
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The leading trading partners of the U.S. Table
1.1 Leading trading partners of the U.S.,
1997 The importance of international trade for
other countries Table 1.2 Exports as a
Percentage of GDP, 1997 Figure 1.2 Exports and
Imports as a Percentage of National
Income
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The U.S. has become increasingly tied to the rest
of the world in finance as well. Foreign
ownership of U.S. financial assets has risen
since 1960s. The average daily volume of
international transactions has reached 2
trillion. The foreign exchange market is
virtually open 24 hours during the day. U.S.
banks and securities firms are all over the
world. Foreign banks have increased their
presence in the U.S. as well. Table 1.3
Worlds Largest Banks and Financial Institutions
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CONSEQUENCES OF GLOBALIZATION Opening the economy
to foreign trade suppresses inflationary
pressures. Example Openness reduces the
crowding-out of private investment. Example Figur
e 1.3 Bond Market and Interest Rates Openness
makes the domestic economy vulnerable to
disturbances initiated overseas. Example Globaliz
ation is a very powerful source in transforming
the economy. Example Figure 1.4 Relative
Productivity Performance of Industries