How-does-the-global-economy-work_ (1).pdf

gec 103- december 2020 GEC 103- DECEMBER 2020 gec 103- december 2020 gec 103- december 2020 HOW DOES THE GLOBAL ECONOMY WORK?  gec 103- december 2020 What is a global economy? The...

gec 103- december 2020 GEC 103- DECEMBER 2020 gec 103- december 2020 gec 103- december 2020 HOW DOES THE GLOBAL ECONOMY WORK?  gec 103- december 2020 What is a global economy? 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. The global economy comprises several characteristics, such as: globalisation Globalisation describes a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration, and transportation. These developments led to the advent of the global economy. Due to the global economy and globalisation, domestic economies have become cohesive, leading to an improvement in their performances. gec 103- december 2020 The global economy comprises several characteristics, such as: international trade International trade is considered to be an impact of globalisation. It refers to the exchange of goods and services between different countries, and it has also helped countries to specialise in products which they have a comparative advantage in. This is an economic theory that refers to an economy's ability to produce goods and services at a gec 103- december 2020 lower opportunity cost than its trade partners. The global economy comprises several characteristics, such as: international finance Money can be transferred at a faster rate between countries compared to goods, services, and people; making international finance one of the primary features of a global economy. International finance consists of topics like currency exchange rates and monetary policy. gec 103- december 2020 The global economy comprises several characteristics, such as: GLOBAL INVESTMENT This refers to an investment strategy that is not constrained by geographical boundaries. Global investment mainly takes place via foreign direct investment (FDI). gec 103- december 2020  gec 103- december 2020 why is global economy important?  gec 103- december 2020 We can understand the importance of the global economy by looking at it in relation to emerging markets: economic importance at a micro and macro level The increase in the world’s population has led to emerging markets growing economically, making them one of the primary engines of world economic growth. The growth and resilience shown by emerging markets is a good sign for the world economy.  gec 103- december 2020 We can understand the importance of the global economy by looking at it in relation to emerging markets: long-term world economic outlook According to financial and economic projections based on demographic trends and capital productivity models, the GDP in emerging market economies in 2019 are likely to keep increasing at a positive rate. According to an emerging markets economic forecast for 2019 conducted by Focus Economics, the economy is set to increase by 7.5% in India, 6.6% in Philippines, 6.3% in China, 5.3% in Indonesia, 5.1% in Egypt, 4.9% in Malaysia, 3.8% in Peru and 3.7% in Morocco.  gec 103- december 2020 gec 103- december 2020 Many people think that the global who economy is controlled by governments of the largest economies in the world, but controls this a common misconception. Although the global governments do hold power over countries’ economies, it is the big economy? banks and large corporations that control and essentially fund these governments. This means that the global economy is dominated by large financial institutions.  gec 103- december 2020 Such transactions have a number of benefits including: how does the global Providing a foundation for worldwide economy work? economic growth, with the international economy set to grow by 4% in 2019 (source: The functioning of the global economy can be World Trade Organisation); explained through one word—transactions. Encouraging competitiveness between International transactions taking place between top countries in various markets; economies in the world help in the continuance of Raising productivity and efficiency across the global economy. These transactions mainly countries; comprise trade taking place between different Helping in the development of countries. International trade includes the underdeveloped countries by allowing them exchange of a variety of products between to import capital goods (machinery and countries. It ranges all the way from fruits and foods, to natural oil and weapons. industrial raw materials) and export primary goods (natural resources and raw materials).  gec 103- december 2020 what are the effects of global economy? Nearly every country in the world is in The main cause of these effects is some way affected by things that happen economics — based on the in what may seem at times, like unrelated countries - due to the production and exchange of goods influence of the globa economy. A good and services. Restrictions on the example of this is the economic impact import and export of goods and that the Brexit vote will have other services can potentially hamper countries, not only in Europe, but the economic stability of across the globe. Brexit was referendum countries who choose to impose too decision for the United Kingdom to withdraw from the European Union (EU). many.  gec 103- december 2020 gec 103- december 2020 gec 103- december 2020 The purpose of international trade is similar to that of trading within a country. However, international trade differs from domestic trade in two aspects: The currencies of at least two countries are involved in international trade, so they must be exchanged before goods and services can be exported or imported; Occasionally, countries enforce barriers on the international trade of certain goods or services which can disrupt the relations between two countries.  gec 103- december 2020 gec 103- december 2020 gec 103- december 2020 Countries usually specialise in those products that they can produce efficiently, which helps in reducing overall manufacturing costs. Then, countries trade these products with other countries, whose product specialisation is something else altogether. Having greater specialisation helps countries take advantage of economies of scale. Economies of scale refer to the proportionate saving in costs gained by an increased level of production. Manufacturers in these countries can focus all their efforts on building factories for specialised production, instead of spending additional money on the production of various types of goods.  gec 103- december 2020 gec 103- december 2020 gec 103- december 2020 Occasionally countries add barriers to international trade. Some of these barriers include trade tariffs (taxes on imports) and trade quotas (limitation on the number of products that can be imported into a country). Trade barriers often affect the economies of the trading countries, and in the long run, it becomes difficult to keep employing such barriers.  gec 103- december 2020 Free Trade: Tree Trade is an excellent method What are the for countries to exchange goods and services. It also allows countries to specialise in the benefits of production of those goods in which they have a global comparative advantage. economy? Movement of labour: Increased migration of the labour THERE ARE NUMEROUS BENEFITS force is advantageous for the recipient country as well as OF A GLOBAL ECONOMY, WHICH for the workers. If a country is going through a phase of INCLUDE: high unemployment, workers can look for jobs in other countries. This also helps in reducing geographical inequality.  gec 103- december 2020 Increased economies of scale: The specialisation What are the of goods production in most countries has led to benefits of advantageous economic factors such as lower global average costs and lower prices for customers. economy? THERE ARE NUMEROUS BENEFITS Increased investment: Due to the presence of OF A GLOBAL ECONOMY, WHICH global economy, it has become easier for INCLUDE: countries to attract short-term and long-term investment. Investments in developing countries go a long way in improving their economies.  gec 103- december 2020 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; Automation; population; FACTORS labour; AFFECTING GLOBAL ECONOMY human capital; technology; law  gec 103- december 2020 gec 103- december 2020 gec 103- december 2020 gec 103- december 2020 THANK YOU