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Task 5 Regional Economic Integration and Financial Markets, and Monetary System

You cannot compete in international business without an understanding of the international monetary system and financial markets. As you complete these activities you will be prepared to engage in activities to apply this understanding.

Investigate Regional Economic Integration a levels of trade.

                          1. Study the graphic of the five levels of trade.
                          2. Watch the video on Free Trade Agreements
                          3. Read Chapter 8 on economic integration. Pay particular attention to
                              1. Five levels of trade integration
                              2. Arguments for and Against free trade
                              3. Integration in Europe
                              4. Integration in America
                              5. Integration in Asia

Supporters of free trade agreements are winning the argument as nations continue to form bilateral and multilateral agreements with other nations. When do you think the proliferation of regional trading blocs and the integration process will stop, if ever? Explain.

Certain groups of countries, particularly in Africa, are far less economically developed than other regions, such as Europe and North America. What sort of integration arrangement do you think developed countries could create with less developed nations to improve living standards?

Learn about the International Monetary System

  1. Read Euro Roller coaster in the beginning of the text Chapter 10. Then find out more about the Euro, which countries use the Euro, and issues surrounding the Euro. What is the exchange rate currently between the dollar and the Euro?
  2. Read Chapter 10 about exchange rates in world currency. What are exchange rates, how stable are they, what determines the exchange rate? What is purchasing power?
  3. Find out about fixed and floating exchange rates. First ask at least five people if they can explain the two. After you have researched the concepts, explain them to a friend or family.

Investigate the future of the International Monetary System.

  1. Watch
  2. Make a graphic that depicts the three possible scenarios for the future of the system for use in the lesson.
  3. Research the monetary crisis in Greece. What caused the crisis? What efforts were made to alleviate the situation? Were they successful? What is Greece’s financial situation now?

You are the chair of an IMF task force. Your job is to reevaluate the policy of bailing out national governments that suffer major losses in the private sector in the name of protecting the value of the currency. Taxpayers in industrial countries typically foot the bill for IMF activities, with loans typically running into the many billions of dollars. Some critics call this system a kind of “remnant socialism” that rescues financial institutions and investors from their own mistakes with taxpayer money. Financial crises often originate as private-sector affairs, but then central banks step in and pledge foreign exchange reserves to shore up the currency.

  1. Do you agree with the belief that the current system privatizes profits and then socializes losses if the government steps in with a bailout?
  2. What sort of alternative can you envision to replace the current system, which often involves an IMF bailout?

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