Economics: Global Economy Essay examples

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Globalization: the expansion of business operations into other countries through the removal of economic barriers and increases in global technology

Global economy: The production, distribution and consumption of goods and services on an international level

Reasons for globalization * Rapid advances in technology (e.g. internet)
The internet makes the exchange of information between countries much easier as well as provides more potential global customers * Relaxation of laws regarding foreign investment
German owned supermarket has over 100 stores in Australia * Reduction of trade barriers and tariffs making the exchange of good and services much easier

Multinational Corporations (MNC)

Multinational Corporation: a business organization that operates in more than one country; their head office is based one country but they have branches in other countries

Examples * Mc Donald’s * Apple * Hyundai * KFC * Subway

Growth of Multinations * Economical, it is cheaper to produce a product in a country that has cheaper production and labour costs

* Economies of scale, due, in part, to rapid advances in technology, have enables multinations to gain market share

* These economies of scale have led MN to develop new markets and use the increase in accessibility to money and other resources available to grow their business

* Multinations have developed products that are popular with consumers in worldwide

Economies of scale: the ability to reduce the ‘per unit’ price of a product by making and selling more products

Example * A company wants to sell a Christian CD, in order to sell this CD they need to rent a studio, pay the musicians, buy the CD’s and rip them etc. To make the 1st CD will be expensive but as this company makes and sells more CD’s the price will go down to about $20-$30

Imports and exports
Import: goods and services purchased from an overseas country and sold in the Australian market

Export: goods and services produced in Australia and purchased by overseas countries

Top Australian Imports * Oil * Crude Oil

Top Australian Exports * Coal * Iron Ore
Top Australian Exports * Coal * Iron Ore


Trade: the exchange of goods and services

Benefits * Offers countries opportunities for economic growth by specialising in exporting goods and services that they are efficient in producing and are expert in (E.G. Korea- Cars such as Kia and Hyundai) * Provides consumers with a wide range of product service choices * Creates greater global competition which forces businesses to produce as efficiently as possible * This then reduces the cost of many consumer items and also results in an increase in consumer purchasing power

Purchasing power: An increase or decrease in how much consumers can buy with a given amount of money (bang for your buck)

Impediments * Major events such wars, terrorism, economic collapse can make trading with ‘high risk’ countries difficult and problematic * When countries implement protectionist policies such as tariffs, to look after their producers * Fluctuations in the Australian dollar can make importing goods from certain countries more expensive. Changing exchange rates sometimes present problems for exporters

Reasons for trade * To obtain goods that we cannot produce ourselves * To increase choice for consumers * To obtain goods for a cheaper price that what we would be able to produce ourselves (E.G. China, cheap products) * To make revenue and profits * To exploit comparative advantage

Australia’s trade performance * The balance of