Understanding the content for year 12 economics is so important to maximize your HSC. Here is some key information for the first topic of HSC Economics.
The Global Economy: What is the global Economy?
The world economy consists of all of the countries that produce goods and services and contribute to GWP.
The growth of the global economy is broadly due to:
- Deregulation of consumer and financial markets
- Increased meters and acquisitions of TNCs (transnational corporations)
- Increased communication due to the internet and satellite communication
- Bilateral (2 countries) and multilateral (2+ countries) agreements between economies
- Movement towards privatisation
Gross World Product: What is the gross world product?
Gross world product (GWP) is the combined gross national income of all the countries in the world.
Globalisation: What is Globalisation?
Globalization is the interconnectedness of goods and services within the global economy. It connects countries together through trade, commerce, travel, and financial transactions. There are various stages of globalisation:
- 1947- Liberalisation in trade of goods w/establishment of General Agreement on Tariffs and Trade (GATT), now the World Trade Organisation (WTO), establishment of the IMF and the World Bank.
- 1960s- Deregulation Of Financial Markets (startof)
- 1972 – IMF endorses use of floating exchange rates
- 1980s – improved technology and communication, floating of AUD
- 1990s – Liberalisation of services and movement of intellectual property
- 2000s – 70% of world trade came from TNCs
Trade in goods and services
Goods: Some kind of benefit to the lives of the people who consume them. E.g, laptop.
Services: A service is a transaction in which no physical goods are transferred from the seller to the buyer. E.g, car wash.
Trends of goods and services are:
- Trade in goods and services has grown rapidly from US$8.7trillion (38%of global output) in 1990 to over US $41.7 trillion (53% of global output) in 2017.
- The size of GWP is now over fifty times its nominal leveling 1960
- Trade is more volatile than GDP.
- Flows of goods and services between nations have increased from $6.2 trillion in 1987 to $43.8 trillion in 2018
- Composition of trade (mix of goods and services traded)- used to be dominated by manufactured goods,with later growth in trade of fuels and minerals reflecting higher prices for oil, gas and coal to suffice the growth of BRICs
- Long Term – growth is expected in finance and communication services
- Direction of trade flows – fast growing economies of East Asia and the Pacific Region (China, Indonesia, Vietnam) experienced the most rapid growth in trade from 7% in 1995 to 18% in 2015 from increased exports of manufactured goods
- Falling share of global trade from high-income economies of North America and Europe (82% to 68% over the same period)
Financial flows: refers to the movement of money for the purposes of speculation, investment or trade.
Foreign Exchange Market (FOREX): It is a network of buyers and sellers exchanging one currency for another in order to facilitate flows of finance between countries.
- Enables countries to obtain funds to finance their domestic investment.
- In Aus, many banks cannot afford mining loans.
- Enables countries to achieve higher levels of investment and economic growth.
- Enables countries with low national savings levels to obtain finance for large-scale business and investment projects and stimulate business investment.
Some negatives are:
- Speculation creates volatility which is an impediment to economic growth and development → IMF = acts as a stabiliser.
Some of the key drivers are speculators and currency traders (who shift billions of dollars in and out of financial markets worldwide.