The Global Economy
The global economy
• Global economy is where economies of individual countries are linked together and changes in single economies affect other economies.
• Globalization refers to the integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity.
• From an economic point of view, the major indicators of integration between economies include:
o international trade in goods and services
o international financial flows
o international investment flows and transnational corporations
o technology, transport and communication
o The movement of workers between countries.
• Each of these indicators priovdes insights into how economy is running and global economy emerging.


Trade in goods and services:
• International trade in goods and services is an important indicator of globalisation because it is a measure of how goods and services produced in an economy are consumed in other economies around the world.
• Trade in goods and services have grown rapidly in the past two decades from 38% of global output to 65% of global output.
• Annual growth in global trade is consistently around twice the level of world economic growth. However in economic downturns, global trade contracts faster than world economic growth reflecting its greater volatility compared to the latter.
• The primary purpose of global trade is to supply goods and services to an economy which either cannot produce them at all, or produce them as efficiently as other economies, and therefore it has to import those goods and services.
• Global trade has grown strongly in recent decades because of technology developments in transport and communication which have significantly reduced the cost of moving goods between economies and providing services to customers in distant markets.
• Governments have encouraged trade by removing barriers and joining international...