International economic integration

Question 1

What is the global economy?

Answer 1

The global economy results from the integration of national economies into a much larger single world economy so that the events and decisions of one country impact on the whole economy

Question 2

What is globalisation?

Answer 2

The integration between different countries and economies and the increased impact of international influences on economic activity.

Question 3

* 5 indicators of integration between countries

How does international trade in goods and services contribute to increased globalisation?

Answer 3

International trade = measure of how goods and services produced in an economy are consumed by other economies around the world.
Increase in global trade ➔ world becomes more interconnected ➔ ⬆ globalisation

China’s economic growth strengthened global trade ties. Australia, initially reliant on China, now emphasises diversifying trade by fostering relations with India and other growing economies.

1. GWP is currently $100US trillion & has grown over 50 times since 1960.
   2.The value of exports of G & S has grown rapidly in recent decades, increasing from US$4.3 trillion in 1990 to over US$27.9 trillion in 2022.

Question 4

* 5 indicators of integration between countries

How do international financial flows contribute to increased globalisation?

Answer 4

International financial flows = movement of $$ through global economy

ADVANTAGE:
1. Ability to obtain funds from foreign countries to finance their own financial investment = economy experiences higher levels of investment and economic
growth

DISADVANTAGE:
Speculators and currency traders (undertake in short term investments through buying and selling financial assets to make profits or hedge against future movements and minimise risk of losses) = large price & currency falls

When IFF grow faster than GWP, signifies ⬆ financial integration (key aspect of globalisation)

Question 5

* 5 indicators of integration between countries

How do investments contribute to increased globalisation?

Answer 5

Investment = movements of funds between economies, invested into economic activity

1. Rapid growth of investment since 1980s.
2. Measure of the globalisation of invesment is expansion of FDI, which involves purchasing of a controlling interest (over 10%) in a foreign
   business or subsidiary.

Question 6

* 5 indicators of integration between countries

How do **TNCs **contribute to increased globalisation?

Answer 6

TNC’s = company operating in 2 or more countries

1. Play a vital role in global investment & are a major source of FDI. Apple expand production facilities in a country , they bring FDI & new technologies.

**ADVANTAGES: **
TNC’s establish or expand production facilities in developing countries bringing new technology, investment, skills, resources, infrastructure
- reinforces globalisation by linking countries through production of G&S
(production process split across economies e.g manufacturing and packaging
take place in different places)

**DISADVANTAGES: **
Reduces competitions (local producers unable to compete with significance and volume of TNCs)

Question 7

* 5 indicators of integration between countries

How does technology, transport and communication contribute to increased globalisation?

Answer 7

Technology:
1. Technological developments facilitate the integration between economies *e.g. developments in freight technology facilitate greater trade in goods *

Communication:
2. Cheaper and more reliable international communication allows provision of commercial services to customers around the world

Transport:
Transport advancements such as aircraft and highspeed rail networks = greater labour
mobility between economies & movement of resources more efficient

*OCED research found that a 1% increase in digital connectivity ⬆ international trade by 1.5% ⮕ globalisation

Question 8

* 5 indicators of integration between countries

How does international division of labour and migration contribute to increased globalisation?

Answer 8

IDOL = signifies the distribution of work responsibilities across national borders.

• Highly skilled workers attracted towards richest economies (higher pay, better
  opportunities)
• Low skilled workers demanded by advanced economies for labour work and basic skills

This reflects international division of labour where people move to where their skills are
needed

⬆ in migration ⮕ increased globalisation
Migration of workers to where jobs are plentiful or better paid. In Jamiaca, 80% of the skilled labour force moves overseas.

World Bank estimates nearly 4% of pop. migrated to work in different countries
in 2020

Question 9

* the international and regional business cycles

Impact of integration on the international business cycle

Answer 9

**IBC **= Refers to the fluctuations in the level of economic activity in the global economy over time.

1. Economic events in one part of the world can reverberate throughout the international economic landscape. *Australia experienced a 63% change in GDP because of inflation/growth rates in G8 industralised countries *
2. Greater interdependence between economies ⬆ synchronization of global growth rates & this strengthens the IBC.

Question 10

* the international and regional business cycles

Impact of integration on regional business cycle

Answer 10

RBC = Refers to the fluctuations in the level of economic activity in certain regions

Some economies are closely integrated
with their neighbours and are therefore very influenced by the economic performance of their major trading partners.

Smaller economies effect performance of regional economies even if they don’t dominate global activity
E.g 2010 financial turmoil in Greece weakened economic conditions in large European countries