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Unformatted text preview: HSC Topic One The Global Economy T HE G LOBAL E CONOMY Where economies are increasingly linked to each other and changes in a single economy can have ripple effects G ROSS W ORLD P RODUCT (GWP) Refers to the sum of total output of goods and services by all economies in the world over a period of time. G LOBALISATION : process of increased integration between different/economies + increased impact of international influences on aspects of eco activity-Trade in goods and services Trade has rapidly grown 38%-68% from 1990-2007 attributed to technological developments in transport, communication, removal of barriers by gov. and joining trade groups (WTO, EU, ASEAN) Composition of trade: demand for manufactured goods and growth in fuels and mineral trade Direction of trade: High income economies experienced fall, while developing economies rapid increase. -Financial Flows Is the most globalised feature expanded substantially through deregulation globally (1970-80s) Exchange trade derivatives reached $US57 trillion almost size of GWP, however falling significantly due to GFC. (IMF is responsible for overall stability of global financial system)- Investment and transnational corporations Since late 1970s rapid growth in movement of capital, FDIs (movement of funds for establishing or buying a new company, 10%+, between economies) $US201 billion in 1990 to $US2 trillion in 2008 reforms in developed and developing countries, yet have favoured OECD countries. TNCs have dominated global and factor markets bringing FDI, new tech, skills and knowledge which governments encourage due to opportunities they bring. Mergers and takeovers have caused huge growth in international investment-Technology, transport and communication Technological developments facilitate integration expanded trade and investment through developments in communication, internet (cheap, reliable, high-speed), freight tech (more efficient)-International division of labour, migration Movement of labour between economies occurs at top/bottom ends of market skilled-workers are in demand + attracted by greater rewards low-skilled demanded to do certain jobs International division of labour- is how the tasks in the production process are allocated to different people in different countries around the world T HE INTERNATIONAL AND REGIONAL BUSINESS CYCLE Refers to changes in world output (GDP) over time (average growth between 1997-2008 was 3.9% & from 2004-08 was at 5% due to resource boom) GFC led to synchronised fall (contraction of -0.6%)-effects of economic conditions are more immediate by increased integration Regional cycles can be different to global activity, with some regions performing stronger/fluctuating more independently from others. (East Asia is dominated by Japan + China) Due to increased integration some economies can affect others US can have ripple effects through NAFTA, likewise, the EU influenced by Euro largest economies. through NAFTA, likewise, the EU influenced by Euro largest economies....
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- Spring '99