What is meant by the term globalization? What are the features of the new global economy? What effects as globalization had on world trade and financial flows?
The global economy is the world economy. It reflects the total amount of economic activity which can be measured by GWP (Gross World Product) and PPP (purchasing Power Parity). PPP aims to get a more accurate method to compare the value of different currencies. This is done by focusing on the quantity of goods and services that can be purchased by one unit of the currency. For a global economy to exist there should be a rising share of economic activity in the world between people living in different countries. This process is known as globalization.
Globalization refers to the increasing integration between countries. This occurs when national boundaries are reduced or removed and world wide changes are taking place to things such as; trade, investment, finance, labour and technology. Globalization means that people in different countries are becoming increasingly linked by common technologies (for example: Internet, fax, etc.) and through goods and services sold on a global basis rather than national.
The size of the world economy can be measured with GWP (Gross World Product). The result of GWP is reached by adding together the outputs of the world economies. In simpler terms you add all the contributing countries GDP (Gross Domestic Product) together.
The total world GDP is hard to measure accurately because each country has different methods of measurements and units of measure. The figures may vary because inflation rates vary from country to country, differences in exchange rates, variations in statistical methods for calculating asset values, government policies relating to taxation can vary from country to country and inaccuracies in collecting data all contribute to the varying statistics of total GWP.
In the table on the previous page, we can see a clear domination by a few economies. In 5 nations which make up 45.3% of...