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Difficulty: MediumThe Digital Revolution and Economic Globalization

“The integration of computing technology and global telecommunications has transformed how goods are designed, produced, and distributed. By allowing companies to coordinate complex operations across distant locations in real time, this technological revolution has accelerated the internationalization of supply chains. While this has lowered consumer prices and boosted efficiency, it has also accelerated the decline of domestic manufacturing employment in the United States and contributed to a growing income gap between highly educated knowledge workers and those without post-secondary training.”

—Federal Reserve Bank report on technology and trade, 2004

Based on the excerpt, the developments described most directly contributed to which of the following economic changes in the United States?

  1. A
    The adoption of federal economic policies that relied on increased government spending and demand-side stimulus to build public telecommunications networks.
  2. The transition of the United States economy toward a service- and information-oriented model, accompanied by a decline in traditional industrial sector jobs.Answer
  3. C
    The creation of Great Society initiatives like the Social Security Administration to directly manage the retraining of displaced manufacturing workers.
  4. D
    The rapid collapse of the Soviet Union's command economy solely due to its inability to import American consumer microprocessors.

Answer

The transition of the United States economy toward a service- and information-oriented model, accompanied by a decline in traditional industrial sector jobs.
The correct answer is correct because the digital revolution and economic globalization in the late twentieth and early twenty-first centuries facilitated the growth of information technology, e-commerce, and global supply chains. This shift transitioned the United States toward a service- and information-based economy while outsourcing many manufacturing jobs to countries with lower labor costs, resulting in a decline in domestic industrial sector employment.

Step-by-Step Solution

1
Analyze the stimulus passage.
The passage details how computing technology and global telecommunications allowed companies to coordinate operations across distant locations, causing the decline of domestic manufacturing and shifting employment patterns.
Understanding the core focus of the stimulus is essential to identifying the correct historical context.
2
Evaluate the choices in the context of late twentieth and early twenty-first century economic trends.
The growth of the digital economy and international trade agreements led to offshoring and a transition to a post-industrial service economy.
Connecting the stimulus to the broader shift from manufacturing to a service/information economy identifies the correct answer.

Key Concept

The Shift to a Service and Information Economy
Estimated Time:1m 30s
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Topics

The Digital Revolution and Economic Globalization

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