1. The global economy Flashcards
(24 cards)
Definition of the global economy
The global economy is made up of economies of individual countries which are all linked to each other and changes in a single economy can have ripple effects on others. Examples: GFC – America fell into a recession, leading to the rest of the world entering a recession.
Advanced economies
the high income, industrialised countries within the world (America, UK). The G7: a group made up of the US, UK, Japan, France, Germany, Italy and Canada. They accounted for 29.7% of world GDP and 33.4% of world exports in 2019 but only 10.2% of the worlds population.
Newly industrialised countries
countries that are in transition from being developing countries towards becoming high-income countries. e.g. South Africa, Brazil
Developing countries
economies with low levels of living standards and which are struggling to achieve high levels of growth and industrialisation. e.g. Argentina
Transition economies
economies that were formerly socialist economies prior to the collapse of socialism in the 1980’s. They are trying to convert to market economies. e.g. Bosnia
Emerging economies
developing countries that have faster rates of growth and better economic prospects e.g. china and India
Statistics for advanced economies
World GDP = 40.3% in 2019
World Population = 14.2% in 2019
Statistics for emerging and developing economies
World GDP = 59.7% in 2019
World Population = 85.8% in 2019
GWP (Gross world product)
The gross world product (GWP) is the combined gross national income of all the countries in the world.
How is GWP measured?
The size of the global economy is measured by the International Monetary Fund (IMF) through the compilation of data which values countries GDP at purchasing power parities (PPP). This means all GDP is measured and compared the same.
GWP in 2019
US$142.006 Trillion
contribution of advanced and emerging, developing economies to GWP
In 2019, advanced economies contributed 40.3% of GWP and emerging and developing economies contributed 59.7% of GWP.
Globalisation
the integration between different countries and economics and the increased impact of international influences on all aspects of life and economic activity.
Definition of trade in goods and services
Trade measures how goods and services produced in an economy are consumed in other economies around the world
Value of trade
The value of exports has increased significantly since 1990 (US$4.3 trillion) to 2019 (US$24.9 trillion)
overall share of global trade
High-income economics (mostly North America and Western Europe) have seen their overall share of global trade fall from 82% of world merchandise exports to 69% between 1995 and 2019.
Over the same time period, the emerging economies of East Asia and the Pacific region have experienced the most rapid increase in trade, with their share of global trade surging from 7% to 16%.
current trade situation (October 2020)
- World trade volume is expected to fall 9.2% in 2020 (less than the expected fall of 12.9%)
- The fall in trade volume depends on the evolution of the pandemic and the government’s response
- Performance of trade increased during June and July with the ease of restrictions and economic activity rising
- Trade volume growth should rise to 7.2% in 2021, but will remain lower than the pre-COVID trend
- Global GDP will fall by 4.8% in 2020, before rising by 4.9% in 2021
- In the second quarter (April, may, June) there was the largest decline in world trade of 14.3% (following this, was a partial rebound in the third quarter of 2020)
financial flows
- finance is the most globalised sector of the world economy because money moves between countries quicker than goods/ services or people
- international financial flows expanded following financial deregulation around the world in the 1970’s and 1980’s
Definition of foreign exchange markets (FOREX markets)
they are networks of buyers and sellers exchanging one currency for another in order to facilitate flows of finance between countries
Statistics of FOREX markets
have had extraordinary growth in recent years with average daily turnover reaching US$5.8 trillion by 2019, up from US$4.0 trillion in 2010
definition of speculator
investors who buy or sell financial assets with the aim of making profits from short-term price movements. › they are often criticised for creating excessive volatility in financial markets
positives of global financial flows
- they enable countries to obtain funds that are used to finance their domestic investment
- they may enable a country to achieve higher levels of investment (and therefore economic growth) than would otherwise have been possible if finance from overseas was not available
negatives of global financial flows
- speculative behaviour creates volatility in foreign exchange markets and domestic financial markets (due to herd mentality)
- speculative behaviour has been responsible for financial crisis’ including Britain in 2016, Turkey in 2018 and repeatedly in Argentina
What is the IMF?
The IMF (international monetary fund) is responsible for the overall stability of the global financial system. One of its roles is to stabilise individual economies experiencing currency crises or financial turmoil in order to prevent flow-on effects to other economies.
