Part One: the Global Economy Flashcards
What is the global economy
Refers to the sum of the interactions between the economies of individual countries that are now increasingly linked together into one economic unit
What is an advanced economy
- High levels of economic development
- Average incomes of > US$30,000 per capita
What is an emerging economy
- Process of raising economic development and economic growth
- Lower per capita incomes than advanced
What is World Real GDP / value of the world output
The aggregate of individual nation’s outputs
How is world output measured
- in $US at market exchange rates - adjusts individual nation’s outputs into US dollar values
- in $US at Purchasing Power Parities (PPP) - compares the relative prices of products in different countries
What is Globalisation
Is the integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity
What are the indicators of globalisation
- Trade in Goods and Services
- Financial Flows
- Investment and TNCs
- Technology, Transport, Communication
- International Division of Labour and Migration
What are the roles of Trading blocs
- They can expand the benefits of specialisation of production beyond the national boundaries by reducing and perhaps eventually eliminating barriers to trade
- Factors of production increasingly move more freely between the economies
Asia-Pacific Economic Cooperation (APEC) Forum
- Formed in 1989 in response to EU and NAFTA
- 41% of the world’s population
- 54% of world GDP
- 44% of world trade
- Not a secluded trading bloc
- Contributed to tariff levels falling
- Created 500,000 Australian jobs between 1989-2010
- APEC is 75% of Australian trade
European Union (EU)
- Reduced tariff levels and quotas between member nations
- Common Agricultural Policy (CAP): subsidy schemes to support local farmers and protect them from IC
- Price floor causes a production surplus, dumped into foreign markets
What is the WTO and when was it formed?
WTO is the only international organisation dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly predictably and freely as possible. Formed 1.1.95
What are the two key features of the WTO
- Promoting Global Trade
2. Dispute Resolution
What are the problems with WTO
- Completion of the Doha Round seems unlikely
- Ineffective in enforcing complaince among powerful nations
- Double standards
- Gives priority to free trade over environmental protection
- Serves the interests of large transnational corporations
What is the International Monetary Fund (IMF) and when was it formed
IMF promotes international financial stability and monetary coorperation. It also seeks to facilitate international trade, promote high employment and sustainable economic growth and reduce poverty around the world. July 1944
What are the problems with IMF
- Structural adjustment policies have had negative effects on countries experiencing financial shocks
- IMF is controlled by rich countries
- The IMF ‘bailouts’ only help rich investors
- The IMF is increasingly irrelevant
What is the purpose of the World Bank
- Support poorest countries
- Help Fragile states
- Assist middle-income countries
- Drive global public schools
- Spur knowledge and learning
What are the problems with the World Bank
- Projects they undertook were ineffective, costly or insufficiently guarded against corrupt practice
- WB programmes are vulnerable to corruption
- Debt relief is an irresponsible economic policy
- Conditionality benefits investors rather than the poor
What was G20
- The world’s 19 largest economies and the EU: 80% of GWP & 65% population
- During GFC, held meetings to ensure macroeconomic policy settings were aligned
- Helped return to 5.4% GWP growth in 2010 from 0% in 2009
What is the International Business Cycle
Refers to the fluctuations in the level of economic activity in the global economy over time
What are the factors that strengthen the international business cycle
- trade flows
- investment flows
- TNCs
- financial flows
- technology
- global interest rates
- commodity prices
- international organisations
Factors that weaken the international business cycle
- domestic interest rates
- government fiscal policies
- other domestic economic policies
- exchange rates
- structural factors
- regional factors
What is a regional business cycle
Are the fluctuations in the level of economic activity in a geographical region of the global economy over time
What is a developing economy
- Low-income levels, half of the population in absolute poverty
- Average incomes of > US$30,000 per capita
