HSC Economics - Topic 1: The Global Economy Notes

HSC TOPIC ONE – THE GLOBAL ECONOMY

Nature of the global economy and globalisation

The Global Economy - this is where economies of individual countries are linked to each other. Changes in one economy can have ripple effects on others. I.E - GFC. Australia has pursued policies to integrate its economy in the world.

Gross World Product - the aggregate value of G+S produced worldwide per year.

Globalisation - Globalization involves the process of increased integration between different countries and economies and the increased impacted of international influences.

The major indicators of integration between economies include:

Finance

Finance is the most globalized aspect of the global economy as money can flow around the world quickly. Financial deregulation has been the cause of growth in global finance. This means that

domestic governments have allowed individuals, firms + financial markets to lend, borrow and speculate on money and financial products such as currency swaps, derivatives and other forms of financial hedging.

Labour

Despite tight restrictions, international immigration continues to grow, as does tourism. High skilled labour travels to developed nations, leading to the ''brain drain'' in some developing nations.

Unskilled labour in developing counties also travel to developed countries and newly industrialised economies. Net world migration was estimated at 19 million people in June 2007.

Worker Remittances (payments sent by foreign workers to their families) reached $91b or 2% of developing nations in GDP in 2005.

Investment & Technology

Another indicator if globalisation has been the rapid growth of investment between nations over the last two decades. This increase in investment can be separated into two categories:

foreign Direct Investment (FDI) and Portfolio Investment. FDI is the purchase or the movement of funds for the purpose of buying companies + firms or a large proportion of these firms (over