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The Global Economy - What is the Global Economy The Global...

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What is the Global Economy? The Global Economy exists when national economies become more closely linked with each other. Globalisation is a feature of modern markets becoming more integrated with each other. Changes in the economy of one nation can significantly affect another nation. Sometimes it is called ‘ coupling’ – if one economy is heavily linked to another nation. The aggregate (total) value of goods and services in the global economy is known as Gross World Product. Transnational corporations (TNCs) are businesses which are established in many nations. TNCs often establish different stages of the production process in other countries. E.g. manufacturing and packaging. Global trade in goods and services has grown to nearly 20 times the level of the 1950s. Financial Flows Global financial arrangements have increased in recent years Most nations have deregulated their financial markets allowing the ease of monetary flows. Movement of finance around the world have an effect on: exchange rates, trade, investment and economic growth. The impact of financial flows on the global market can be evidenced in the sub-prime mortgage market disaster in the USA in 07-08. Investment Global investment also occurs as a result of the globalisation process. Foreign Direct Investment (FDI) involves funds being directly invested in economic activity in another nation or in the purchase of foreign businesses. In Australia, the regulation of this sort of investment is done by the Foreign Investment Review Board (FIRB). Investment in foreign nations can be direct, speculative or financial . The internet has facilitated much of the world’s trade and investment. Also, the USA receives a majority of the world’s income from royalties and licensing fees for hte use of computer technology. Labour People as labour units are also affected by globalisation as they migrate around the world for work. People are not as geographically mobile as goods and services due to: o Language barriers o Family and social links o Immigration restrictions o Terrorism fears o Skills barriers o Educational barriers o Cultural barriers Trade and Financial Flows In recent years global trade has changed with regards to its: size, composition, direction .
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The composition of trade is the mix of goods and services which nations exchange with each other. There is significant world trade in: o Simply Transformed Manufactures (STMs) o Elaborately Transformed Manufactures (ETMs) o Commodities o Services In the modern world Newly Industrialised Countries (NICs) are seeing an increase in their share of world trade. There are barriers to free trade within the world. These barriers are in the form of trading blocs and protectionism .
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