Summary unit 5: Modern Economics Life

1-Economic terminology
 Recession: when economic indices are declining
 Investment: making more money out of a business
 Stagflation/ stagnation: slowdown in economic growth
 Mortgage: an agreement to have money from the bank on the security of your property ( the person is
called a mortgagee)
 Deflation: when prices crash to earth≠ inflation
 Loan: money lent by the bank
 Stock exchange: stock market

2- The economic crisis 2009

Between 2007- 2009 the world economy was flourishing and thriving as economic indices were on the rise.
After this period of fair growth, the American financial system was seriously affected when sub-prime
mortgagees with a weak credit history could not pay the loans they had from banks. As house prices in the
US went down, the financial institutions especially banks became suspicious of investment , borrowing and
lending money. Because world economies are interrelated, the world economy was badly hurt and no one
expected such a sudden stagflation.

3- The effects of the economic crisis

 Unemployment: the world has been fiercely harassed by rampant economic recession. A major weatherglass
to detect this impact could never be pertinent than the increasing rate of unemployment across the world
from developed countries such as the Us and the UK to developing countries
 The rising unemployment has putting people who have jobs on the line. With the recession forcing
businesses to cut back on workers, employees are increasingly doing all they can to hang onto their jobs and
are forgoing many of the benefits that once allowed them to balance the demands of work and family life.
 Budgeting and Practicing Economy: rather than granting employees flexibility to save costs, employers are
more likely to freeze salaries, slash the travel budget or resort to layoffs. Besides that, tightening up also
reach to trifles like cancelling parties, cutting off the supply of free coffee and other unnecessary expenses.
 Increasing volatility and falling prices for primary commodities

 Declining remittances to developing countries

 Sharply reduced revenues from tourism
 Massive reversal of private capital flows
 Reduced access to credit and trade financing
 Reduced public confidence in financing institutions
 Reduced ability to maintain social safety nets and provide other social services, such as health and education
 Collapse of housing markets

4- The European Union

The European Union (EU) is a political and economic union of 27 member states that are located primarily
in Europe. It has an estimated total population of about 447 million. The EU has developed an internal single
market through a standardised system of laws that apply in all member states in those matters, and only those
matters, where members have agreed to act as one. EU policies aim to ensure the free movement of people, goods,
services and capital within the internal market, enact legislation in justice and home affairs and maintain common
policies on trade, agriculture, fisheries and regional development. For travel within the Schengen Area, passport
controls have been abolished. A monetary union was established in 1999, coming into full force in 2002, and is
composed of 19 EU member states which use the euro currency. The EU and European citizenship were established
when the Maastricht Treaty came into force in 1993. The EU traces its origins to the European Coal and Steel
Community (ECSC) and the European Economic Community (EEC), established, respectively, by the 1951 Treaty of
Paris and 1957 Treaty of Rome. The original members of what came to be known as the European
Communities were the Inner Six: Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. The
Communities and their successors have grown in size by the accession of new member states and in power by the
addition of policy areas to their remit. The latest major amendment to the constitutional basis of the EU, the Treaty
of Lisbon, came into force in 2009.
Prior to 2020, no member state had left the EU. In 2017, the United Kingdom signified its intention to leave and
negotiated a withdrawal agreement that took effect upon its secession on 31 January 2020. Since leaving, the UK is
in a transitional phase in which EU law, rights and privileges apply until at least 31 December 2020.
5- Emerging economies

An emerging market is a country that is recognized as having a significant GDP growth (as well as a large global
contribution to production), an increase in the size of the middle class, and a potential for rapid growth and
investment. Emerging markets used to be a somewhat obscure niche of the international investing world. These
rapidly developing countries play an increasingly important role in the global economic system. In fact, more than
half of global economic growth is now driven by emerging markets. BRIC (Brazil, Russia, India, China) nations alone
account for roughly 40% of production globally. For investors, these countries have offered some spectacular returns
over time. Other emerging markets are Mexico, Indonesia, South Korea, Turkey, Colombia, Indonesia, Vietnam,
Egypt, Turkey, and South Africa.

6- Global economy and women

Global economy has negative effects on women everywhere. Indeed, they are compelled to do menial, difficult and
risky jobs but they are underpaid although they work longer hours than men. They are deprived of their rights as they
are not represented in unions. They suffer from inequality, injustice and discrimination, not to mention physical abuse
or sexual harassment. To relieve the suffering of working women, new laws should be enacted and included in free
trade agreements to protect women basic rights so that they can work in a better environment and fair conditions.

7- How can Tunisia boost its economy in the light of the present conditions?
 Tunisians should work harder to enhance production and productivity in all economic fields
 They should be aware of the importance of consuming national products as this is the only way to help
create jobs for the great number of the unemployed.
 The government ought to set up incentives to encourage people- whether they are Tunisians or foreigners-
to invest in the country, especially in the poorest areas
 Tunisia is required to diversify its economic partners as well as its economic sectors
 Craftsmen, small farmers and tradesmen should be encouraged to open up their own businesses by giving
them loans with low interest