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Notes - THE GLOBAL ECONOMY Features of the global economy...

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THE GLOBAL ECONOMY – Features of the global economy Nature of the global economy and globalisation The Global Economy: Is the world economy. The combined activity that takes place within and between countries. GWP: Gross World Product. The total value of all finished goods and services produced in the world economy in one year. Globalisation : Can be understood as the process by which natural and government- created barriers between nations are broken down. - Trend for individuals, firms and governments around the world to become increasingly dependant and integrated which each other. Increasing International Trade Flows - Trade in g&s has increased significantly in recent years - Since WW1 int. trade has increased at twice the rate of increase of GWP - Since 1980 most trade has been between higher income and NIC’s Reasons: 1) Consumerisation: Increase in modernization and higher incomes leads to higher D for g&s 2) Economic Liberalisation: More countries have accepted free trade – Tariffs lowered and restrictions lessened. Growth of International Finance - The globalisation of trade is the most globalised feature of the world economy - It has assisted in linking economies and more recently spread financial crisis around the globe. - Daily turnover on the global FOREX market reached $3.2trillon in 2006, over 2/3 lager than the 2004 figure. Reasons: 1) Deregulation: Fixed -> Floating exchange rates. Increase flow of foreign K. Fewer government controls. 2) New technology: Internet, Computerisation and telecommunications have enable transfer of info and ease in international finance trading. Growth of International Investment and Technology - There has been increases in FDI (Foreign Direct Investment) to buy or establish businesses and investments - FDI flows were $201b in 1990 but reached $1.3trillion in 2006 - (Direct Investment: Long-term investment. Porfolio I: Short-term I ) Reasons: 1) Rise of transnational Corporations : Eg. Nike
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2) Increases in Takeovers and Merges : Companies buying or joining with foreign companies around the world. Internationalisation of Labour - Less int. than other features - Dispite barriers of language and immigration restrictions, increased number of people are moving to overseas for work - The International Labour Office estimate that 120million people are working outside their home countries Reasons : 1) High End : Higher skilled workers move overseas for increased pay/wages 2) Low End: Migrants sometimes are being increasingly employed in areas which locals are reluctant to work. Eg. Fruit picking in Australian, Construction in Japan. INTERNATIONAL BUSINESS CYCLE - Changes in the level of economic activity in the world economy over time - Recently there has been a strong relationship between economic growth performance of the major world economies: US and Australia - There is some conversion; however, there is no strong relationship between the whole world economies. Japan is an outrider with low economic growth, -2% growth in 1998.
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