Global Economy PDF

GLOBAL ECONOMY or ECONOMIC GLOBALIZATION  The global economy refers to the interconnected worldwide economic activities that take place between multiple countries. These economic activities can have either a positive or negative impact on the countries involved. Global economy can be defined as...

GLOBAL ECONOMY or ECONOMIC GLOBALIZATION  The global economy refers to the interconnected worldwide economic activities that take place between multiple countries. These economic activities can have either a positive or negative impact on the countries involved. Global economy can be defined as the sum of activities that take place both within a country and between different countries. Each country is a separate unit, with its own industrial production, labor market, financial market, resources, and environment. Free trade: Free trade is an excellent method for countries to exchange goods and services. It also allows countries to specialize in the production of those goods in which they have a comparative advantage.  Movement of labour: Increased migration of the labour force is advantageous for the recipient country as well as for the workers. If a country is going through a phase of high unemployment, workers can look for jobs in other countries. This also helps in reducing geographical inequality.  Increased economies of scale: The specialization of goods production in most countries has led to advantageous economic factors such as lower average costs and lower prices for customers.  Increased investment: Due to the presence of global economy, it has become easier for countries to attract short-term and long-term investment. Investments in developing countries go a long way in improving their economies. FACTORS AFFECTING THE GLOBAL ECONOMY According to the latest economic news, here are some of the key factors that influence and affect how well the global economy works:  Natural resources;  Infrastructure;  Population;  Labour;  Human capital;  Technology;  Law. 2 types of economies 1. Protectionism – protecting one’s economy from foreign competition by creating trade barriers. NORTH KOREA 2. Trade liberalization – reducing trade barriers to make international trade easier between countries.  Various ways to make easy trading: 1. Free trade – Canada-Korea Free Trade Agreement where Canada removed 97.8% of its tariff lines for goods from south korea, and south korea will eliminate 98.2% of its tariff for goods from Canada. 2. Trade bloc – agreement between government to reduce or eliminate trade barriers. NAFTA 3. Outsourcing – manufacturing transfer from developed nations to developing nations to reduce the cost of product.