Global Economy Hsc Summary

Topics: International trade, Economics, International economics Pages: 12 (4184 words) Published: June 21, 2013
The global economy:
Most economists now talk about the global economy, where the economies of individual countries are linked to each other and changes in a single economy can have ripple effects on other. The aggregate value of all goods and services produced worldwide each year in the global economy is known as gross world product. Economies are now more closely integrated, stronger and far reaching than ever before. Notes:

Globalisation has become a dominant economic, political and social theme. Globalisation is the integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity. Globalisation in recent decades has involved layers of influences in all directions. The United States is currently unrivalled as the leading world economy but its power is constrained by many other powerful economies in Europe and Asia. There are many dimensions and statistics that can be used as measures of globalisation. The major indicators of integration between economies / drivers of globalisation are: * Trade in goods and services

* Financial flows
* Investment flows and transnational corporations
* Technology , transport and communication
* International division of labour and migration

Trade in goods and services – This is an important indicator of globalisation as it is a measure of how goods and services produced in an economy are consumed in other economies around the world. Trade in goods and service has grown rapid in recent decades, increasing from $8.7 trillion US in 1990 to $39.5 trillion US in 2008. Annual growth in the value of trade has been consistently around twice the level of world economic growth. However, during economic downturns, global trade has contracted faster than world economic output, highlighting the greater volatility of trade compared with gross world product. The size of global trade reflects the fact that economies do not produce all the items they need, or do not produce them as efficiently as other economies, and have to import goods and service. Major forces behind increasing global trade include the developments in transport and communication, government removal of barriers and joining of international and regional trade groups. The mix of what goods and services are traded, known as the composition of trade, can have an impact on individual economies. As global demand for certain goods grow, so too do the economies that specialise in their production. E.g. Demand for fuels and minerals has increased Australia’s levels of exports and further increasing Australia’s economic growth. Trends in the direction of trade can also have an impact on individual economies. E.g. China’s economies playing an increasingly important role in global trade, other economies have placed an increased priority on their trade relationships with china. Australia may respond to this by preparing for larger trading relationships through encouraging students to learn Mandarin at school. Notes:

Financial Flows – Because finance is so important to how modern economies work, the globalisation of finance has had a major impact in terms of linking economies around the world. Finance is the most globalised feature the economies as money is able to move faster between countries than goods, services or people. Since deregulations in 1970s and 80s, international financial flows have expanded substantially. New technologies and global communications networks have linked financial markets throughout the world. This allows events in major international markets to produce immediate results throughout the world. E.g. The GFC which started in America and had a ripple effect on the rest of the world. While there is no one measure of international financial flows, all have shown dramatic increase during the globalisation era. An important feature of international financial flows are foreign exchange...
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