The Global Economy

swelch_96
Mind Map by swelch_96, updated more than 1 year ago
swelch_96
Created by swelch_96 almost 6 years ago
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Mind Map on The Global Economy, created by swelch_96 on 22/08/2014.

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The Global Economy
1 International Economic Integration
1.1 Gross World Product
1.1.1 AKA Aggregate Value
1.1.1.1 Total Output of G & S of all economies
1.2 The Global Economy
1.2.1 Ripple Effect
1.3 Globalisation
1.3.1 International Division of Labour
1.3.1.1 high income economies attract highly skilled workers
1.3.1.2 Barriers include: Immigration restrictions, language, culture, incompatible education
1.3.1.3 search for most efficient and costless
1.3.2 Technology, Transport and Communication
1.3.2.1 Technology ultimate driver
1.3.2.1.1 transfer money globally
1.3.2.2 transport = less time, money, efficiency
1.3.3 Investment and TNC
1.3.3.1 TNC's include: Shell, Toyota,
1.3.3.1.1 Mergers and Acquisitions: Microsoft and Skype
1.3.3.2 Foreign Direct Investment
1.3.3.2.1 global investment
1.3.3.2.1.1 >10% in firm
1.3.3.2.1.1.1 Long-term
1.3.3.2.2 Approx. 20% of investment
1.3.3.3 Portfolio Investment
1.3.3.3.1 Global Finance
1.3.3.3.1.1 Short- Term
1.3.3.3.1.1.1 <10% in firm
1.3.4 Increased Trade in Goods and Services
1.3.4.1 more volatile than GWP
1.3.4.1.1 Contracts faster in downturns
1.3.4.2 Trade Flows changed to South/ East Asia
1.3.4.3 ATM: vehicles, clothing, electrical goods.
1.3.4.3.1 Forecast: finance and communication, services, oil, gas.
1.4 Financial Flows
1.4.1 Most Globalised Feature
1.4.1.1 FOREX turnover $4Trillion, 2011.
1.4.2 Deregulation 70's/80's
1.4.2.1 Speculators create excessive volability
1.5 The International and Regional Business Cycle
1.5.1 63% of changes in level of output in Aust. linked to changes of interest rates, growth and inflation of G7
1.5.1.1 Factors weakening the international business cycle: interest rates, fiscal policies, exchange rates, structural factors, regional factors.
1.5.1.1.1 Factors strengthening the international business cycle: Trade flows, Investment flows, TNCs, financial flows, financial market and confidence, global interest rates, commodity prices, international organisations.
1.5.2 Cross-border integration
1.5.3 regional economies are integrates
1.5.3.1 USA, Canada, Mexico
1.5.3.2 East Asia, Australia
2 Trade, Financial Flows and Foreign Investment
2.1 Basis of Free Trade
2.1.1 No Barriers
2.1.1.1 Comparitive advantage
2.1.1.1.1 Opportunity Cost
2.1.2 Advantages
2.1.2.1 Obtain G&S unable to produce
2.1.2.1.1 specialise in G&S=> better Allocation of resources
2.1.2.1.1.1 Economies of scale => decreased average cost
2.1.2.1.1.1.1 international Competitiveness
2.1.2.1.1.1.1.1 Higher Global Standard of Living
2.1.2.1.1.1.1.1.1 Encourage Innovation
2.1.3 Disadvantages
2.1.3.1 ^ in short term unemployment due to domestic firms not being able to compete
2.1.3.1.1 Infant Industries Suffer
2.1.3.1.1.1 'Dumping' of products on domestic markerts
2.1.3.1.1.1.1 environmental costs due to irresponsible production to reduce costs
2.2 Influence of Government Forums
2.2.1 G7/8
2.2.1.1 60% GWP, 14% world pop.
2.2.1.1.1 consists of largest industrialised Nations
2.2.1.1.1.1 Losing power due to China
2.2.2 G20
2.2.2.1 80% of GWP, 2/3 world Pop.
2.2.2.1.1 Since GFC, emerged as leading forum for coordinating Global Response to avoid recession
2.3 Role Of International Organisations
2.3.1 OECD
2.3.1.1 34 members
2.3.1.1.1 committed to democracy & Market economy
2.3.1.1.1.1 ^ standard of living, ^ employment. ^ sustainable growth
2.3.1.2 Conduct & publish research on a wide range of economic policy issues, coordinating economic cooperation among member nations
2.3.2 World Bank
2.3.2.1 provide assistance to poorer countries with their economic development
2.3.2.1.1 Millenium Development Goals
2.3.2.2 Act as a leader in times of need
2.3.3 United Nations
2.3.3.1 193 members
2.3.3.1.1 Broad range agenda': international security, Environment, Poverty and Development, International Law, Global health Issues
2.3.4 IMF
2.3.4.1 Maintain international financial stability, particular in FOREX Markets
2.3.4.1.1 188 members
2.3.4.1.1.1 Before Deregulation, oversaw fixed exchange rates
2.3.4.1.1.1.1 helps minimus effects of recessions
2.3.4.1.1.1.1.1 > stimulus packages
2.3.4.1.1.1.1.1.1 When helping economies, they must change policies in accordance with IMF, or Structural Adjustment Policies
2.3.4.1.1.1.1.1.1.1 1990's AFC, IMF forced Asian Countries to use contractionary macro policies
2.3.4.1.1.1.1.1.1.1.1 This caused structural issues in other countries
2.3.5 WTO
2.3.5.1 Free up Global Trade by removing barriers, & to solve disputes between nations
2.3.5.1.1 Has power to enforce trade agreements
2.3.5.1.1.1 155 nations
2.3.5.1.1.1.1 Doha Round:
2.3.5.1.1.1.1.1 > reducing average protection
2.3.5.1.1.1.1.1.1 > Lowering tariffs on manufactured goods
2.3.5.1.1.1.1.1.1.1 > reducing trade restrictions, services
2.3.5.1.1.1.1.1.1.1.1 Complete abolition of aggregate export subsidies
2.3.5.1.1.1.1.1.1.1.1.1 giving 50 poorest members tariff and quote free access to high income nations for at least 97% of goods.
2.4 Trading Blocs, Monetary Unions & Free Trade Agreements
2.4.1 Trading Bloc
2.4.1.1 joining together a formal preferential trading agreement
2.4.1.1.1 > Bilateral
2.4.1.1.1.1 >Multilateral
2.4.2 Free Trade Agreements
2.4.2.1 formal agreement between countries to reduce trade barriers & restrictions
2.4.2.1.1 AKA Preferential Trade Agreement
2.4.2.1.1.1 Global Free Trade Agreements (WTO) designed to breakdown all trade restriction & free up world trade
2.4.3 Monetary Unions
2.4.3.1 two or more countries sharing same currency
2.4.3.1.1 creating a 'single market' due to no need to exchange currencies
2.4.3.1.1.1 efficient trade
2.4.4 European Union (EU)
2.4.4.1 Trading Bloc: 33% GWP
2.4.4.2 Advantages
2.4.4.2.1 removed trade barriers
2.4.4.2.1.1 single currency= more efficient
2.4.4.2.1.1.1 single market, surge in economic growth
2.4.4.3 Disadvantages
2.4.4.3.1 smaller agricultural trading countries find more difficult to be competitive
2.4.4.3.1.1 significant decrease exports into Europe e.g.Agricultural Products
2.4.4.3.1.1.1 Increased tariff barriers non-member countries
2.4.5 APEC
2.4.5.1 Regional Trade Bloc: 54% GWP, 41% world pop.
2.4.5.2 Advantages
2.4.5.2.1 Member countries tariffs decrease
2.4.5.2.1.1 retaliation to EU
2.4.5.2.1.1.1 An open trading bloc
2.4.5.2.1.1.1.1 Greater Cooperation
2.4.5.3 Disadvantages
2.4.5.3.1 minimal decrease tariffs
2.4.5.3.1.1 losing significance
2.4.6 NAFTA
2.4.6.1 USA, Canada, Mexico: 13% GWP
2.4.6.1.1 Advantages
2.4.6.1.1.1 USA shifted production to Mexico- cheaper labour
2.4.6.1.1.1.1 Significant increase in exports for Canada and Mexico
2.4.6.1.1.1.1.1 agricultural free trade
2.4.6.1.2 Disadvantages
2.4.6.1.2.1 Arguments it caused trade diversity instead of trade creation due to reallocation of labour
2.4.6.1.2.1.1 Unfair for domestic firms
2.4.7 ASEAN
2.4.7.1 Emerging nations
2.4.7.2 Advantages
2.4.7.2.1 Eliminating tariffs on 96% Aus. Exports to region.
2.4.7.2.1.1 Resulted in AANZFTA
2.4.7.2.1.1.1 Counterweight APEC
2.4.7.3 Disadvantages
2.4.7.3.1 Limited in its influence in Global Economy due to small number of nations
2.4.8 Bilateral
2.4.8.1 Advantages
2.4.8.1.1 provide flexibility
2.4.8.1.1.1 enhance regional free trade
2.4.8.2 Disadvantages
2.4.8.2.1 divert resources from efficient uses
2.4.8.2.1.1 Introduce trade distorting tariffs
3 Protection
3.1 Reasons for Protection
3.1.1 Infant Industries
3.1.1.1 in some cases barriers not removed -> no incentive
3.1.1.1.1 ^ in market share, capacity, economies of scale
3.1.1.1.1.1 Protected Short-term until able to compete
3.1.1.1.1.1.1 new industries cannot compete globally
3.1.2 Dumping
3.1.2.1 when foreign firms attempt to sell their goods in another countries market at unrealistically low prices
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