1. The Global Economy Flashcards
Globalisation
The integration between different countries and economies.
Global Economy
Activities of all economies of the world as a whole
Gross World Product
Sum of total goods and services produced by all economies
World Trade is an… (example too)
Important indicator of the extent of globalisation. In decades to 2010 trade grew at a faster rate than economic growth, at the same rate following.
The pattern and direction of world trade…
reflect the increasing importance of advanced technology and services
Globalisation has occurred most rapidly in…
global finance which faces few barriers and is driven mostly by speculative activity.
Foreign Direct Investment (FDI)
Injection of funds into an economy to establish a business or purchase an existing business.
Transnational Corporations (TNCs)
Drive FDIs and involve the transfer of technological innovations between economies.
Technology, transport and communication…
have driven increased economic integration by facilitating linkages
Globalisation also contributed to international division of labour because…
of the migration of workers to countries where jobs are plentiful or better paid.
What are International and regional business cycles
extent to which economies tend to experience a similar pattern of boom, downturn and recovery at similar times.
Free Trade
no artificial barriers to trade imposed by governments.
Protection
any type of government action that has the effect of giving domestic producers an artificial advantage.
Arguments in favour of protection
helping “infant industries” to establish themselves / protecting local jobs / strengthening defence and national security / preventing foreign companies dumping goods.
Arguments against protection
results in a distortion in resource allocation towards less efficient sectors / can lead to a less internationally competitive economy / higher unemployment / lower standard of living
Tariffs
Tax on imports
Subsidies
payment to local producers
Local content rules
a requirement that a proportion of goods are made locally
quotas
limit on the quantity of goods imported
Export incentives
other means to encourage local production
Trade Agreements
way of reducing barriers to trade between nations.
World Trade organisation roles
enforces the existing WTO agreement / resolves trade disputes / major forum for global trade negotiations pursuing the goal of global free trade.
International Monetary Fund
maintain international financial stability / monitor the international financial system / assist economies who face major economic crises.
World Bank
assist poorer nations with economic development through loans / development assistance / technical advice.
G7 & G20
two most important forums for global economic policy coordination.
