You are on page 1of 13

The Global Economy

Agn Vaiiulyt, BN10B

What is The Global Economy?


A global economy is characterized as a world economy with an unified market for all goods produced across the world. It gives domestic producers an opportunity to expand and raise capacity according to global demands likewise it also provides an opportunity to domestic consumers to choose from a vast array of imported goods. The concept of a global economy cannot be understood in isolation. For this globalization needs to be defined first.

Globalisation may be defined as the integration of production and consumption in all markets across the world.

Impact of Globalisation: The emergence of Trans National Companies or Multi National Companies has been due to the direct impact of globalization. Globalisation has boosted productivity and capacity of these companies to astronomical highs because of the stiff competition at the international level.

Global Economic Indicators


It is economic variables or parameters that may determine global economic behavior over a period of time reflecting the movement of the global economy as a whole. These are Global Economic indicators:
Real GDP growth rate Real GDP per capita Exports-Imports Balance of Payments (BOP) Inflation Rates Unemployment People below poverty line (generally standardized as having less than $1 a day) External Debt, if any, as a percentage of GDP

Real GDP growth rate: shows the increase in value of all final goods and services produced within a nation in a given year, taking into account inflation. GDP per capita: An approximation of the value of goods produced per person in the country, equal to the country's GDP divided by the total number of people in the country. Exports-Imports: Export - shipping the goods and services out of the port of a country. Import bringing in the goods and services into the port of a country.

Balance of Payments (BOP): an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, and financial capital, as well as financial transfers. The BOP summarizes international transactions for a specific period, usually a year, and is prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items.

Inflation Rates: measure of inflation, the rate of increase of a price index (for example, a consumer price index). It is the percentage rate of change in price level over time. The rate of decrease in the purchasing power of money is approximately equal.
Unemployment: when people are without jobs and they have actively looked for work within the past four weeks. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force.

World Unemployment rates 2009

People below poverty line: is the minimum level of income deemed necessary to achieve an adequate standard of living in a given country. Percentage population living on less than $1.25 per day 2009

External Debt: part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions.

Global Economy Advantages & Disadvantages


Advantages:
1. Raise of world productivity and incomes; 2. Improvement of the standards of living at a global level; 3. The industrial sector attain cheap labour, capital and technology. 4. Promotion of peace and cooperation. 5. Wide customer base (pro for small companies). 6. Outsourcing.

Disadvantages:
1. Wide divide between have-nots and have-lots in less developed economy countries. 2. Different wage standards. 3. Loss of domestic jobs. 4. Differences in the legal environment. 5. The difficulty of competition.

Summation:
It is a widely accepted view that globalization would not only benefit all countries across the world but would also work towards the betterment of the economy as a whole. Although The global economy has become hotly controversial. Critics allege that its props, free markets and free trade, take jobs away from well-paid workers in the wealthy nations while creating sweatshops in the poor ones. Its supporters insist that the free movement of capital stimulates investment in poor nations and creates jobs in them. Nonetheless, a global economy may be beneficial for the world at large. This may result in the economies of the world fighting issues such as global warming, climate change and environmental degradation collectively and effectively.