Instructor Manual For: Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
Instructor Manual For
Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
TABLE OF CONTENTS
Purpose and Perspective of the Chapter ................................................................................................... 1
Chapter Objectives ..................................................................................................................................... 1
Complete List of Chapter Activities and Assessments............................................................................. 2
Key Terms.................................................................................................................................................... 2
Chapter Outline .......................................................................................................................................... 3
PURPOSE AND PERSPECTIVE OF THE CHAPTER
The purpose of this chapter is to introduce students to the international economy and globalization. First,
we emphasize the high degree of economic interdependence that characterizes today’s economies. Next,
we discuss the United States as an open economy; globalization as a process of greater interdependence
among countries and their citizens; and the nature of international competitiveness—for firms, industries,
and nations. Finally, we look at the potential effects that international trade has on workers, and conclude
with a summary of the advantages and disadvantages of globalization.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
1.1 Explain economic interdependence from an economic and political perspective.
1.2 Describe the defining characteristics of each wave of globalization since 1870.
1.3 Describe the United States as a global economy.
1.4 List some of the fallacies of international trade.
1.5 Describe the positive and negative effects that international trade may have on domestic workers.
1.6 Explain why some economists conclude that globalization has gone too far.
[return to top]
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 1
accessible website, in whole or in part.
, Instructor Manual For: Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
COMPLETE LIST OF CHAPTER ACTIVITIES AND ASSESSMENTS
The following table organizes activities and assessments by objective, so that you can see how this
content relates to objectives and make decisions about which content you would like to emphasize in your
class based on your objectives. For additional guidance, refer to the Teaching Online Guide.
Chapter Activity/Assessment Source (i.e., PPT Duration
Objective Slide, Workbook)
1.1 Discussion Activity PPT Slide 9 10 min
1.1 Case Study Activity PPT Slide 10 15 min
1.1–1.6 Self-Assessment Activity PPT Slide 47 30 min
1.1–1.6 Chapter 1 Study Questions Textbook 1 hour
[return to top]
KEY TERMS
Artificial intelligence: A technology that enables computers and machines to simulate human
intelligence and perform complex tasks that traditionally required human reasoning.
Automation: The creation of technology, such as robotics, used to produce and deliver various goods and
services.
Diesel engines: Technical innovation that powers cargo ships, locomotives, and large trucks.
Economic efficiency: A state where scarce resources are optimally allocated to maximize total social
welfare and output while minimizing waste.
Economic interdependence: All aspects of a nation’s economy are linked to the economies of its trading
partners.
Friendshoring: An effort to trade with allies who have similar values, such as democratic institutions or
maintaining peace.
Globalization: The process of greater interdependence among countries and their citizens.
Natural gas-fired turbines: Technical innovation that powers planes and other means of transportation.
Openness: The ratio of a nation’s exports and imports as a percentage of its gross domestic product
(GDP).
Security: A new kind of globalization which emphasized doing business with people you can rely on and
in countries your government is friendly with.
[return to top]
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 2
accessible website, in whole or in part.
, Instructor Manual For: Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
CHAPTER OUTLINE
The following outline organizes activities (including any existing discussion questions in PowerPoints or
other supplements) and assessments by chapter (and therefore by topic), so that you can see how the
content relates to the topics covered in the text.
I. Globalization of Economic Activity (1.1, PPT Slides 4–11)
A. Globalization is the process of increased interdependence among countries and their
citizens. It involves greater interaction of markets across nations through trade,
immigration, and foreign investment. It encompasses economic, political, technological,
and cultural aspects.
B. People are more likely to consume products from other countries. Increased likelihood of
investing in or earning income from foreign countries. Greater communication and travel
between countries. Increased awareness of and influence from global economic
developments.
C. Technological Change: Innovations since the Industrial Revolution have increased
productivity and reduced transportation costs. Recent developments in information and
communications technology have further reduced barriers of time and geography. The
internet has significantly reduced communication costs and increased trade in services.
D. Trade and Investment Liberalization: Multilateral trade negotiations have led to reduced
tariffs and removal of most quotas. Liberalization of investment transactions and
development of international financial markets have facilitated global trade.
E. Companies can now locate different parts of their production processes in various
countries while maintaining a single corporate identity. has led to the transfer of jobs,
technologies, capital, and skills around the globe.
II. Waves of Globalization (1.2, PPT Slides 12–20)
A. First Wave of Globalization (1870–1914). This period saw a significant increase in global
interdependence, driven by: decreased tariff barriers; technological advancements
reducing transportation costs (e.g., steamships, railways); increased exports as a share of
world income (nearly doubling to 8 percent); rise in per capita incomes (1.3 percent
annual average)
B. Second Wave of Globalization (1945–1980). Following World War II, this wave was
characterized by: establishment of global economic institutions (e.g., IMF, World Bank,
GATT); focus on free trade and rule of law; increased per capita incomes in developed
countries; limited participation of developing countries, mainly in agricultural and natural
resource products
C. Third Wave of Globalization (1980–present). This ongoing wave is marked by:
developing countries (e.g., China, India, Brazil) entering global manufacturing markets;
increased international capital movements; foreign outsourcing and participation in
international production networks; rise of automation technologies; digital technology
driving globalization, with China and emerging nations taking a leading role.
D. In recent years, there has been some backpedaling on globalization: decline in global
trade during and after the 2007–2009 Great Recession; rise of nationalist policies (e.g.,
Brexit, US withdrawal from TPP); shift in political discourse from economic benefits to
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 3
accessible website, in whole or in part.
, Instructor Manual For: Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
concerns about job loss and national security; implementation of protectionist measures
and industrial policies
III. The United States as an Open Economy (1.3, PPT Slides 21–31)
A. The United States has become increasingly integrated into the global economy over
recent decades, with its openness to international trade growing significantly since the
1950s. This integration is evident across multiple dimensions.
B. The U.S. is deeply involved in global trade, ranking as the world’s second-largest trading
nation. The openness of the U.S. economy, measured by exports and imports as a
percentage of GDP, has increased since the 1950s after a period of decline between 1890
and 1950. However, the U.S. has been lagging behind other large advanced economies in
trade openness in recent years. Smaller nations tend to have higher measures of openness
compared to larger countries like the U.S.
C. Labor mobility has not significantly increased for the U.S. in the past century. As of
2024, about 15 percent of the U.S. population was foreign-born, similar to the percentage
in 1900.
D. Capital flows have increased substantially. Foreign ownership of U.S. financial assets has
risen since the 1960s, with the U.S. becoming a net borrower from the rest of the world
by the late 1980s. International banking has become more globalized, with the daily
volume of foreign exchange trading reaching about $7 trillion, compared to $205 billion
in 1986.
E. The importance of international trade varies significantly among U.S. states: Louisiana
was the most trade-dependent state in 2022, with a trade share of 50.7 percent of GDP.
Michigan had a trade share of 35 percent of GDP in 2022, largely due to its auto industry.
Hawaii had the lowest dependence on international trade, with a trade share of only 3
percent of state GDP in 2022.
IV. International Trade and Finance Applications (1.3, PPT Slides 32–40)
A. The COVID-19 pandemic dealt a significant blow to globalization, exacerbating pre-
existing challenges and exposing vulnerabilities in the global economic system.
Globalization was already faltering before the pandemic. The pandemic caused
simultaneous supply and demand shocks and highlighted vulnerabilities in global supply
chains. Policymakers attempted to mitigate damage through underwriting firms at risk of
bankruptcy and implementing social insurance programs.
B. Kodak’s downfall is a classic example of how a dominant market leader can falter due to
complacency and failure to adapt to changing technologies and market conditions.
Several factors contributed to its decline: Resistance to change; underestimating
competition; misreading emerging markets; late entry into digital cameras; rise of
smartphones. After emerging from bankruptcy in 2013, the company shifted its focus
away from cameras towards commercial printing and other ventures, becoming a much
smaller and leaner organization.
C. Schwinn’s story demonstrates how globalization can fundamentally reshape industries,
forcing established companies to adapt or face decline. It highlights the challenges of
maintaining quality and brand identity while competing with lower-cost foreign
producers, and the potential pitfalls of outsourcing production to suppliers who may
become future competitors.
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 4
accessible website, in whole or in part.
Chapter 1: The International Economy and Globalization
Instructor Manual For
Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
TABLE OF CONTENTS
Purpose and Perspective of the Chapter ................................................................................................... 1
Chapter Objectives ..................................................................................................................................... 1
Complete List of Chapter Activities and Assessments............................................................................. 2
Key Terms.................................................................................................................................................... 2
Chapter Outline .......................................................................................................................................... 3
PURPOSE AND PERSPECTIVE OF THE CHAPTER
The purpose of this chapter is to introduce students to the international economy and globalization. First,
we emphasize the high degree of economic interdependence that characterizes today’s economies. Next,
we discuss the United States as an open economy; globalization as a process of greater interdependence
among countries and their citizens; and the nature of international competitiveness—for firms, industries,
and nations. Finally, we look at the potential effects that international trade has on workers, and conclude
with a summary of the advantages and disadvantages of globalization.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
1.1 Explain economic interdependence from an economic and political perspective.
1.2 Describe the defining characteristics of each wave of globalization since 1870.
1.3 Describe the United States as a global economy.
1.4 List some of the fallacies of international trade.
1.5 Describe the positive and negative effects that international trade may have on domestic workers.
1.6 Explain why some economists conclude that globalization has gone too far.
[return to top]
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 1
accessible website, in whole or in part.
, Instructor Manual For: Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
COMPLETE LIST OF CHAPTER ACTIVITIES AND ASSESSMENTS
The following table organizes activities and assessments by objective, so that you can see how this
content relates to objectives and make decisions about which content you would like to emphasize in your
class based on your objectives. For additional guidance, refer to the Teaching Online Guide.
Chapter Activity/Assessment Source (i.e., PPT Duration
Objective Slide, Workbook)
1.1 Discussion Activity PPT Slide 9 10 min
1.1 Case Study Activity PPT Slide 10 15 min
1.1–1.6 Self-Assessment Activity PPT Slide 47 30 min
1.1–1.6 Chapter 1 Study Questions Textbook 1 hour
[return to top]
KEY TERMS
Artificial intelligence: A technology that enables computers and machines to simulate human
intelligence and perform complex tasks that traditionally required human reasoning.
Automation: The creation of technology, such as robotics, used to produce and deliver various goods and
services.
Diesel engines: Technical innovation that powers cargo ships, locomotives, and large trucks.
Economic efficiency: A state where scarce resources are optimally allocated to maximize total social
welfare and output while minimizing waste.
Economic interdependence: All aspects of a nation’s economy are linked to the economies of its trading
partners.
Friendshoring: An effort to trade with allies who have similar values, such as democratic institutions or
maintaining peace.
Globalization: The process of greater interdependence among countries and their citizens.
Natural gas-fired turbines: Technical innovation that powers planes and other means of transportation.
Openness: The ratio of a nation’s exports and imports as a percentage of its gross domestic product
(GDP).
Security: A new kind of globalization which emphasized doing business with people you can rely on and
in countries your government is friendly with.
[return to top]
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 2
accessible website, in whole or in part.
, Instructor Manual For: Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
CHAPTER OUTLINE
The following outline organizes activities (including any existing discussion questions in PowerPoints or
other supplements) and assessments by chapter (and therefore by topic), so that you can see how the
content relates to the topics covered in the text.
I. Globalization of Economic Activity (1.1, PPT Slides 4–11)
A. Globalization is the process of increased interdependence among countries and their
citizens. It involves greater interaction of markets across nations through trade,
immigration, and foreign investment. It encompasses economic, political, technological,
and cultural aspects.
B. People are more likely to consume products from other countries. Increased likelihood of
investing in or earning income from foreign countries. Greater communication and travel
between countries. Increased awareness of and influence from global economic
developments.
C. Technological Change: Innovations since the Industrial Revolution have increased
productivity and reduced transportation costs. Recent developments in information and
communications technology have further reduced barriers of time and geography. The
internet has significantly reduced communication costs and increased trade in services.
D. Trade and Investment Liberalization: Multilateral trade negotiations have led to reduced
tariffs and removal of most quotas. Liberalization of investment transactions and
development of international financial markets have facilitated global trade.
E. Companies can now locate different parts of their production processes in various
countries while maintaining a single corporate identity. has led to the transfer of jobs,
technologies, capital, and skills around the globe.
II. Waves of Globalization (1.2, PPT Slides 12–20)
A. First Wave of Globalization (1870–1914). This period saw a significant increase in global
interdependence, driven by: decreased tariff barriers; technological advancements
reducing transportation costs (e.g., steamships, railways); increased exports as a share of
world income (nearly doubling to 8 percent); rise in per capita incomes (1.3 percent
annual average)
B. Second Wave of Globalization (1945–1980). Following World War II, this wave was
characterized by: establishment of global economic institutions (e.g., IMF, World Bank,
GATT); focus on free trade and rule of law; increased per capita incomes in developed
countries; limited participation of developing countries, mainly in agricultural and natural
resource products
C. Third Wave of Globalization (1980–present). This ongoing wave is marked by:
developing countries (e.g., China, India, Brazil) entering global manufacturing markets;
increased international capital movements; foreign outsourcing and participation in
international production networks; rise of automation technologies; digital technology
driving globalization, with China and emerging nations taking a leading role.
D. In recent years, there has been some backpedaling on globalization: decline in global
trade during and after the 2007–2009 Great Recession; rise of nationalist policies (e.g.,
Brexit, US withdrawal from TPP); shift in political discourse from economic benefits to
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 3
accessible website, in whole or in part.
, Instructor Manual For: Carbaugh, International Economics, 19e, 2026, 9798214041605;
Chapter 1: The International Economy and Globalization
concerns about job loss and national security; implementation of protectionist measures
and industrial policies
III. The United States as an Open Economy (1.3, PPT Slides 21–31)
A. The United States has become increasingly integrated into the global economy over
recent decades, with its openness to international trade growing significantly since the
1950s. This integration is evident across multiple dimensions.
B. The U.S. is deeply involved in global trade, ranking as the world’s second-largest trading
nation. The openness of the U.S. economy, measured by exports and imports as a
percentage of GDP, has increased since the 1950s after a period of decline between 1890
and 1950. However, the U.S. has been lagging behind other large advanced economies in
trade openness in recent years. Smaller nations tend to have higher measures of openness
compared to larger countries like the U.S.
C. Labor mobility has not significantly increased for the U.S. in the past century. As of
2024, about 15 percent of the U.S. population was foreign-born, similar to the percentage
in 1900.
D. Capital flows have increased substantially. Foreign ownership of U.S. financial assets has
risen since the 1960s, with the U.S. becoming a net borrower from the rest of the world
by the late 1980s. International banking has become more globalized, with the daily
volume of foreign exchange trading reaching about $7 trillion, compared to $205 billion
in 1986.
E. The importance of international trade varies significantly among U.S. states: Louisiana
was the most trade-dependent state in 2022, with a trade share of 50.7 percent of GDP.
Michigan had a trade share of 35 percent of GDP in 2022, largely due to its auto industry.
Hawaii had the lowest dependence on international trade, with a trade share of only 3
percent of state GDP in 2022.
IV. International Trade and Finance Applications (1.3, PPT Slides 32–40)
A. The COVID-19 pandemic dealt a significant blow to globalization, exacerbating pre-
existing challenges and exposing vulnerabilities in the global economic system.
Globalization was already faltering before the pandemic. The pandemic caused
simultaneous supply and demand shocks and highlighted vulnerabilities in global supply
chains. Policymakers attempted to mitigate damage through underwriting firms at risk of
bankruptcy and implementing social insurance programs.
B. Kodak’s downfall is a classic example of how a dominant market leader can falter due to
complacency and failure to adapt to changing technologies and market conditions.
Several factors contributed to its decline: Resistance to change; underestimating
competition; misreading emerging markets; late entry into digital cameras; rise of
smartphones. After emerging from bankruptcy in 2013, the company shifted its focus
away from cameras towards commercial printing and other ventures, becoming a much
smaller and leaner organization.
C. Schwinn’s story demonstrates how globalization can fundamentally reshape industries,
forcing established companies to adapt or face decline. It highlights the challenges of
maintaining quality and brand identity while competing with lower-cost foreign
producers, and the potential pitfalls of outsourcing production to suppliers who may
become future competitors.
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 4
accessible website, in whole or in part.
