 Globalization: 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.
 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.
 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.
 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).

Why is the global economy important?

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. Before delving into
the next point, you need to understand the concept of
microeconomics. It refers to the study of the behaviour of
households, individuals, and firms with respect to the allocation
of resources and decision-making. In simpler terms, this branch
of economics studies how people make decisions, what factors
 affect their decisions, and how these decisions affect the price,
demand, and supply of goods in the market. Therefore, from the
perspective of microeconomics, some of the largest firms with
high market value and a few of the richest individuals in the
world hail from these emerging markets, which has helped in the
higher distribution of income in these countries. However, many
of these emerging countries are still plagued by poverty, and
work still needs to be done to work towards eradicating it.

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.

How does Global Economy work?

 Providing a foundation for worldwide economic growth, with the

international economy set to grow by 4% in 2019 (source: World
Trade Organization);
 Encouraging competitiveness between countries in various
markets;
 Raising productivity and efficiency across countries;
 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).