CHAPTER ONE Economics_Notes_Fernando

CHAPTER ONE Economics_Notes_Fernando - Economics Notes...

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Economics Notes TOPIC 1: THE GLOBAL ECONOMY FEATURES OF THE GLOBAL ECONOMY Unit 1.1 – Nature of the Global Economy and Globalisation The Global Economy: o Globalisation refers to the integration of local and international economies into a unified political, economic and cultural order and does not infer a singular phenomena. It rather refers to the embracement of the freer movement of goods and financial capital, services, skills, ideas and people across geographic and political borders. o This has led to a greater emphasis on the role of organizations such as the WTO, the IMF, the World Bank and the OECD, as well as regional trading blocs such as APEC, the EU and NAFTA. Gross World Product (GWP): o Gross World Product measures the value of production worldwide: In 1999, $US 38,804 billion (PPP) In 2001, was changed to Gross National Income (GNI), which was $US 46,403 billion (PPP) o Between 1900 and 2000, world GDP has increased 19-fold, mainly due to technological advancements. Trade: o One measure of the growth of the global economy is trade dependency the importance of exports and imports as compared with the value of the nation’s production. o International trade and capital movements are essential to exploit global markets, but it can result in individual economies being susceptible to shocks. o Very high trade-dependant nations are scattered around the world suggesting that there is a high level of trade flow globally. o Top 5: Singapore, Hong Kong, Malaysia, Belgium, Estonia o Bottom 5: Argentina, Egypt, Japan, USA, Rwanda, Australia (24 th ) Investment and Technology: o Growth of the global economy has increased the opportunity for investment through the breaking down of national boundaries, increasing capital stocks. o Also, facilitated the diffusion of technology, manifested in new and efficient productive procedures. Finance: o International financial flows have grown rapidly in the last 25 years because: Int’l trade grown X2 of GDP growth Int’l direct investment grown X3 of GDP growth Int’l equity investment growth X10 of GDP growth
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o Modern financial markets promote the exchange between net savers and users of capital for productive purposes, allowing for optimum use of capital and maximisation of world output. o Large amounts of mobile capital coupled with imbalances domestic policy and volatile exchange rates can generate serious int’l crises. Labour: o Workers move between countries to find better job opportunities. This has grown by almost half since 1965. o The three types of labour movements are: Immigration or emigration (highly skilled) Temporary (low skilled) Illegal entrants (no skills) International Business Cycle: o This refers to the periodic but irregular expansion and contraction in production, as measured by changes to real GDP.
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