Lesson 1: How Does The Global Economy Work? Flashcards
refers to the interconnected worldwide economic activities that take place between multiple countries. These economic activities can have either a positive or negative impact on the countries involved.
GLOBAL ECONOMY
describes a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration, and transportation. These developments led to the advent of the global economy. Due to the global economy and globalisation, domestic economies have become cohesive, leading to an improvement in their performances.
Globalisation
is considered to be an impact of globalisation. It refers to the exchange of goods and services between different countries, and it has also helped countries to specialise in products which they have a comparative advantage in. This is an economic theory that refers to an economy’s ability to produce goods and services at a lower opportunity cost than its trade partners.
INTERNATIONAL TRADE
Money can be transferred at a faster rate between countries compared to goods, services, and people; making international finance one of the primary features of a global economy. International finance consists of topics like currency exchange rates and monetary policy.
INTERNATIONAL FINANCE
This refers to an investment strategy that is not constrained by geographical boundaries. Global investment mainly takes place via foreign direct investment (FDI).
GLOBAL INVESTMENT
The increase in the world’s population has led to emerging markets growing economically, making them one of the primary engines of world economic growth. The growth and resilience shown by emerging markets is a good sign for the world economy.
ECONOMIC IMPORTANCE AT A MICRO AND MACRO LEVEL
According to financial and economic projections based on demographic trends and capital productivity models, the GDP in emerging market economies in 2019 are likely to keep increasing at a positive rate.
According to an energing markets economic forecast for 2019 conducted by Focus Economics, the economy is set to increase by 7.5% in India, 6.6% in Philippines, 6.3% in China, 5.3% in Indonesia, 5.1% in Egypt, 4.9% in Malaysia, 3.8% in Peru and 3.7% in Morocco.
LONG-TERM WORLD ECONOMIC OUTLOOK
Many people think that the global economy is controlled by governments of the largest economies in the world, but this a common misconception. Although governments do hold power over countries economies, it is the big banks and large corporations that control and essentially fund these governments. This means that the global economy is dominated by large financial institutions.
WHO CONTROLS THE GLOBAL ECONOMY?
What are the benefits of global economy?
•Free Trade
•Movement of labour
•Increased economies of scale
•Increased investment
is an excellent method for countries to exchange goods and services. It also allows countries to specialise in the production of those goods in which they have al comparative advantage..
Free Trade
Increased migration of the labour force is advantageous for the recipient country as well as for the workers. If a country is going through a phase of high unemployment, workers can look for jobs in other countries. This also helps in reducing geographical inequality.
Movement of labour
The specialisation of goods production in most countries has led to advantageous economic factors such as lower average costs and lower prices for customers.
Increased economies of scale
Due to the presence of global economy, it has become easier for countries to attract short-term and long-term investment. Investments in developing countries go a long way in improving their economies.
Increased investment
FACTORS AFFECTING GLOBAL ECONOMY
■NATURAL RESOURCES;
■AUTOMATION;
■POPULATION;
■LABOUR:
■HUMAN CAPITAL;
■TECHNOLOGY;
■LAW
