Global Economy & Globalisation Lecture Notes

Question-and-answer flashcards covering key concepts, facts, statistics, and institutions related to globalisation, international trade, and global financial flows.

What does economic interdependence mean?

It is the linking of individual country economies so that changes in one can create ripple effects in others.

Why is Australia considered highly integrated into the global economy?

Because it has actively embraced globalisation and implemented policies to link its economy with those of other nations.

What is GWP?

Gross World Product—the total value of all goods and services produced worldwide in a year.

Define globalisation in one sentence.

Globalisation is the growing integration of countries and economies and the increasing influence of international factors on economic and social life.

Name five major indicators of economic globalisation.

International trade in goods and services; international financial flows; international investment flows and transnational corporations; advances in technology, transport and communication; and movement of workers across borders.

How has the value of world exports changed since 1990?

It has risen from about US$4.3 trillion (19 % of global output) to roughly US$22.6 trillion (26 % of global output).

Since 1960, how has the growth of world trade compared to growth in GWP?

World trade volume is over 125 times its 1960 level while GWP is over 50 times, showing trade has grown much faster than production.

What policy trend largely explains the faster growth of trade relative to output?

Trade liberalisation—the reduction or removal of trade barriers such as tariffs and quotas.

Why do smaller or specialised economies rely heavily on imports?

Because they either cannot produce all the items they need or cannot produce them as efficiently as other economies.

List three major international trade groups that foster global trade.

The World Trade Organisation (WTO), the European Union (EU), and the Association of South-East Asian Nations (ASEAN).

How has the direction of world merchandise exports shifted since the 1980s?

High-income economies’ share fell from 82 % to 65 %, while East Asia & the Pacific’s share rose from 7 % to 20 %.

Which sector is the most globalised part of the world economy and why?

Finance, because money can move between countries faster and with fewer obstacles than goods and services.

What major reforms in the 1980s–1990s expanded global financial flows?

Financial deregulation, which lifted controls on foreign currency markets, overseas investments, share markets, and banking interest rates.

What is the primary purpose of global financial flows for borrowing nations?

To obtain funds to finance domestic investment projects that exceed national savings.

Define foreign exchange (forex) markets.

Networks of buyers and sellers exchanging one currency for another to facilitate international financial transactions.

Who are the main drivers of short-term movements in forex markets?

Speculators and currency traders seeking profit or hedging against exchange-rate fluctuations.

What was the average daily turnover in global forex markets in 2019?

Approximately US$6.6 trillion.

Give one positive and one negative effect of speculative investment in forex markets.

Positive: it supplies liquidity and funding for investment. Negative: it can create currency volatility and inflationary pressures when large sums move quickly.

Which international institution is tasked with promoting stability in the global financial system?

The International Monetary Fund (IMF).

How has the composition of world trade shifted regarding goods versus services?

Manufactured goods still dominate, but services—especially finance and communication—are the fastest-growing segment.

Why do highly educated economies benefit most from growth in trade in services?

Because expanding service sectors like finance and communication rely on advanced skills that such economies possess.

Provide an example of how growth in one major economy can alter other nations’ trade priorities.

China’s rapid expansion prompted countries like Australia to prioritise trade with China and invest in mining sectors supplying Chinese demand.