TCW The Global Economy PDF

THE CONTEMPORARY WORLD LESSON 2 GLOBAL ECONOMY  Define economic globalization; Discuss how global economy works; Learning Identify the factors that facilitate Outcomes economic globalization; and Present how the global economy...

THE CONTEMPORARY WORLD LESSON 2 GLOBAL ECONOMY  Define economic globalization; Discuss how global economy works; Learning Identify the factors that facilitate Outcomes economic globalization; and Present how the global economy works by means of group activity. What is Global Economy? What is Global Economy? It is all the economies of the world which we consider together as one economic system. Put simply, it is one giant entity. It is also the system of the trade and industry across the world that has emerged due to globalization. In other words, the way in which countries economies have been developing to operate collectively as one system. Two meanings: 1. The economy of the whole planet.i.e. global GDP Gross Domestic Product 2. The way the world is today, with countries’ so entertwined and interdependent that they all seem like parts of one whole. The whole we call global economy. Global Economy It is the exchange of goods and services integrated into a huge single global market. It is virtually a world without borders, inhabited by marketing individuals and/or companies who have joined the geographical world with the intent of conducting research and development and making sales. DIFFERENTIATED ACTIVITY Differentiated Activity: 1. Create 5 groups. Each group will pick a task. Each group will be given 30 minutes to prepare. After the preparation each group will be given 5-7 minutes delivery/presentation of their output. Group 1 OUTSOURCING is the process of hiring third parties to conduct services that were typically performed by the company. Often, outsourcing is used so that a company can focus on its core operations. It is also used to cut costs on labor, among others. WITH YOUR GROUP MEMBERS, CREATE A SHORT STORY INVOLVING AN INDIVIDUAL WHO BECAME A PARTICIPANT OR WORKER IN AN OUTSOURCING JOB ABROAD. Group 2 SURPLUS AND DEFICITS A good place to get a quick snapshot of global trade as well as net economic flows in and out of a nation is by looking at a nations’ trade surplus and deficits. CREATE A SITUATION IN THE PHILIPPINES ILLUSTRATING THE CONCEPT OF SURPLUS AND DEFICITS BY MEANS OF A POWERPOINT. MAKE A SHORT DESCRIPTION AND EXPLANATION OF YOUR PRESENTATION Group 3. GLOBAL VALUE CHAIN (GVCS) Refers to international production sharing, a phenomenon where production is broken into activities and tasks carried out in different countries. RESEARCH AND PRESENT THROUGH ILLUSTRATION, POWERPOINT PRESENTATION/FIGURE/DRAWING/EXPLANATION ABOUT HOW GLOBAL VALUE CHAIN WORKS IN THE GLOBAL WORLD, INCLUDE PICTURES. Group 4 Market integration is the fusing of many markets into one. A state of affairs as a process involving attempts to combine national economies into larger economic region. SHOW HOW MARKET INTEGRATION WORKS IN THE GLOBAL ECONOMY BY MEANS OF COMPOSING A SONG OR POEM THEN DELIVER IT TO THE CLASS. Group 5 ACT IT OUT THROUGH A ROLE PLAY HOW THE GLOBAL ECONOMY WORKS: INCLUDE TRANSACTIONS ABOUT TRADING /BUYING AND SELLING/IMPORT & EXPORT OR SHOW HOW A CERTAIN COUNTRY BORROW MONEY FROM INTERNATIONA FINANCIAL INSTITUTION ETC. CRITERIA: CONTENT 40% PRESENTATION 30% CREATIVITY 20% COLLABORATION 10% 100%  Characteristics of Global Economy  Globalization: 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 globalization, domestic economies have become cohesive, leading to an improvement in their performances.  Characteristics of Global Economy  International trade: International trade is considered to be an impact of globalization. It refers to the exchange of goods and services between different countries, and it has also helped countries to specialize 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 lower opportunity cost than its trade partners.  Characteristics of Global Economy  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. It consists of topics like currency exchange rates and monetary policy.  Characteristics of Global Economy  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). HOW DOES GLOBAL ECONOMY WORK? Transactions International transactions taking place between top economies in the world help in the continuance of the global economy. Trade International trade includes the exchange of a variety of products between countries. It ranges all the way from fruits and foods, to natural oil and weapons.. View it as a marketplace where “transaction” strongly binds “seller” and “buyer”. “Seller” and “buyer” are the economies that make up the global economy while “transaction” may refer to international trade or any other economic concept that binds countries. The workings of the global economy heavily depend on the transactions between economies –including large and small economies. Continuance of the global economy is strongly influenced by the fact that many countries agree to trade with each other in a bid to achieve certain economic goals. Some countries have strict policies against importation and exportation, it remains a fact that most, if not all countries, engage in international trade by exporting goods/services to other countries or importing from other countries.. WHAT ARE THE EFFECTS OF GLOBAL ECONOMY?.  Restrictions on the import and export of goods and services can potentially hamper the economic stability of countries who choose to impose too many.  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.  Countries usually specialize 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 specialization is something else altogether..  Having greater specialization 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 specialized production, instead of spending additional money on the production of various types of goods..  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. What is the difference between Global Economy and World Economy? What is the difference between Global Economy and World Economy? Put globalization first then global economy. Globalization basically means business operating at international level. Global economy or world economy is the collective term of individuals country’s economy and that happens only through international exchange of goods and services. WHAT DO YOU THINK ARE THE ADVANTAGES AND DISADVANTAGES OF THE OPERATION OF THE GLOBAL ECONOMY? Advantages 1. Providing a foundation for worldwide economic growth, 2. Encouraging competitiveness between countries in various markets; 3. Raising productivity and efficiency across countries; 4. Helping in the development of underdeveloped countries by allowing them to import capital goods (machinery and industrial raw materials) and export primary goods (natural resources and raw materials). 5. Free trade: Free trade is an excellent method for countries to exchange goods and services. It also allows countries to specialise in the production of those goods in which they have a comparative advantage. 6. Movement of labor: Increased migration of the labor 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. 7. 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. 8. 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. Largely, the global economy has stimulated some big corporations in the US, UK and China to establish branches across different developing nations in Africa and other continents. Disadvantages of Global Economy 1. A country may lack independence on the free will trade engagements. 2. Depression is a disadvantage. Developing countries are depressed by industrialized nations due to overall control effect. WHO CONTROLS THE GLOBAL ECONOMY? Many people think that the global economy is controlled by governments of the largest economies in the world, but this a common misconception. Although governments do hold power over countries’ economies, it is the big banks and large corporations that control and essentially fund these governments. This means that the global economy is dominated by large financial institutions. According to world economic news, US banks participate in many traditional government businesses like power production, oil refining and distribution, and also the operating of public assets such as airports and train stations. SURPLUSES & DEFICITS SURPLUS  A surplus describes a level of an asset that exceeds the portion used.  An inventory surplus occurs when products remain unsold.  Budgetary surpluses occur when income earned exceeds expenses paid.  A surplus results from a disconnect between supply and demand for a product, or when some people are willing to pay more for a product than other consumers.  Typically, a surplus causes a market disequilibrium in the supply and demand of a product. This imbalance can sometimes mean that the product cannot efficiently flow through the market. DEFICITS Types of Government Deficits 1. Budget Deficit occurs when a government spends more in a given year than it collects in revenues, such as taxes. Ex: if a government takes in $10 billion in revenue in a particular year, and its expenditures for the same year are $12 billion, it is running a deficit of $2 billion. That deficit, added to those from previous years, constitutes the country's national debt. 2. Trade Deficit exists when the value of a nation’s imports exceed the value of its exports. For example, if a country imports $3 billion in goods but only exports $2 billion worth, then it has a trade deficit of $1 billion for that year. In effect, more money is leaving the country than is coming in, which can cause a drop in the value of its currency as well as a reduction in jobs. Other deficit-related terms: Current account deficit is when a country is importing more goods and services than it exports. Cyclical deficits occur when an economy is not performing well because of a down business cycle. Deficit financing refers to the methods governments use to finance their budget deficits—such as issuing bonds or printing more money. Deficit spending is when a government spends more than the revenue it collects during a certain period. Fiscal deficits occur when a government's total expenditures exceed the revenue that it generates, excluding money from borrowing. Other deficit-related terms: Income deficit is a measurement used by the U.S. Census Bureau to reflect the dollar amount by which a family’s income falls short of the poverty line. Primary deficit is the fiscal deficit for the current year minus interest payments on previous borrowings. Revenue deficit describes the shortfall of total revenue receipts compared with total revenue expenditures for a government. Structural deficits are said to occur when a country posts a deficit even though its economy is operating at full potential. Twin deficits occur when an economy has both a fiscal deficit and a current account deficit. Global Value Chain (GVCs) Refers to international production sharing, a phenomenon where production is broken into activities and tasks carried out in different countries. Ex: Scrap metal Waste paper T-shirts iphones OUTSOURCING Is the transfer of activities once performed by entities to a business in exchange for money. Example: Healthcare & military  Offshore outsourcing which involves sending work to companies in other countries.  Variety of Indian firms become very important settings for the outsourcing of various kind of work- best known of which is that performed by call centers. Questions: 1. Do you think that the Philippines is being harmed as other countries transfer their activities to us also known as outsourcing? 2. Does the position of China as giants in the economic chain threaten the status of less developed countries in the global market? MARKET INTEGRATION  Occurs when prices among different locations or related goods follow similar patterns over a long period of time.  Groups of prices often move proportionally to each other and when is very clear among different markets.  Refers to the expansion of firms by consolidating additional marketing.  A state of affairs as a process involving attempts to combine national economies into larger economic region. Thank you class have a nice day!