The Global Economy

The global economy is all the economies of individual nations that are linked together rather than individual economies. Therefore Globalisation plays an important role on involving the process of increased integration between countries and economies and increased impact of international aspects of life and economic activity .And the major indicators of integration between economics include trade in goods and services, financial flows, investment flows ,technology and the movement of workers.

International trade in goods and services measure by the amount of it produced in an economy are consumed in the other economies around the world. Gross world product aggregate value of all goods and services produced worldwide each year in the global economy.Now compare to 1950 it is over ten times the volume produced and trade has grown up to almost 50 times.In recent year, government have encouraged trade by removing barriers and join international and regional trade groups such as World Trade Organisation and European Union. However in order to ensure domestic industry maintain competitive to the other economy , different protection methods occur, including ,Tariffs on raising the price of imports, Quotas on controls the volume of goods that is allowed to be imported and Subsidies a financial assistance to domestic producers.

International financial flow is now a leading role in linking the global economy , because money can move between countries much quicker than goods and services. International financial flow have expanded substantially following financial deregulation around the world and dramatic increase during globalization. While there is no single measurement of international financial flow, foreign exchange market are one of the most important features, which are networks of buyers and sellers exchanging one currency for another in order to facilitate flows of finance between countries. The main benefit of greater global financial flows is that it enables countries to obtain funds that are used to finance their domestic investment.

Globalization of investments the expansion of Foreign Direct Investment, which involves the movement of funds directly invested into economic activity. FDI flows are strongly influenced by the level of economic activity. During global economic recession in the late 2000s , we can see that FDI flows fall significantly. Therefore transnational corporations play a vital role in global investment flows. As TNCs like Microsoft ,Sheel and Ford establish or expand production factilities in a country, the bring foreign investment, new technology ,skills and knowledge .Since the early 1990s, the number of TNCs has grown from 37000 to 104000.In overall terms most investment still comes from domestic sources. Foreign direct investment typically accounts for less than 20 per cent of total investment, meaning that over 80 per cent of investment still comes from within national economies.