HSC Economic Topic One Summary
Globalization refers to the increasing economic integration between countries leading to the emergence of a global market place to a single market, where countries are becoming increasingly linked by common technologies and the customization of goods and services marketed and distributed on a global rather than national base
Gross World Product is defined as the total market value of good and services produced by all countries at a given time
Futures of Globalization
- Increased trade in good and services between nations, leading to a increase in World Gross Product
- The integration of national financial systems to create a world system
- Technology plays a greater role in linking trade between nations
- Internationalization of labour
- Rapid liberalization of the global trading environment
- Increasing importance of TNC, where increasing conducting trade and investment across national boundaries
- Increased importance of global originations eg.
The main drivers of globalization are technology, economic liberalization and consumerism
The major cost of globalization is that lack of international controls over capital investments which can lead to destabilizing speculation and the volatility of short term capital flow. This has lead to the increased scope for contagion where a crisis in one financial market or economy spreads to others causing regional and even global stability eg. The Asian financial crisis in 1997
Two types of shocks can be transmitted from the international economy to the domestic economy:
- Real shock refers to changes in real variables including world output, commodities price and technological change eg. oil which caused stagflation(inflation and unemployment occur at same time)
- Financial or monetary shock refers to changes in financial variables. Such as international share prices. Financial shocks are transmitted more quickly than real shocks through changes in asset price and...