World Economics assignment Essay Example for Free

humanity Economics assignment EssayIntroductionIn this continue, it impart introduce the knowledge base Economy. Main focus is the key feature of the global economic environment. The core economic issues that are focused on in this report are mountain, foreign rightments, exchange paces and economies undergoing change.ProcedureTo gather the required information to produce this report, extensive usage of the internet, various search engines and university library to render global economics theory and current affairs. abridgment on Element 1Firstly, international flock maturationd word-wide output. International business deal activities have fetch and explore the comparative advantages of a country, meanwhile, boost the professionalism of industries, higher cost-efficient because of this. If the world-wide output is enhanced and comparative advantages are well-exerted, producers can obtain benefits of economies of scale, accordingly, the cost will accrue and profit as cend.Secondly, it provides greater range of commodities for consumers and more choice. Customers coming from varied counties could buy commodities which are not produced domestically by the means of international trade. It contributes to enlarging purchasing market. Since, no guinea pig the similar types of products or goods that not are able produced in domestic area, they could be got through international trade.Additionally, world trade has made an overall increase in standard of living. Specifically, a host of job vacancies offered by muti-national companies help solving the employment problem, then corporation taxation and individual revenue are elevated. Consequently, increased tax will be invested to welfare and infrastructure system.Analysis on Element 2 correspond to wikipedia, Free trade is a system of trade policy that al low gears traders to act and or transact without interference from political relation. harmonise to the law of comparative advantage the policy per mits trading partners mutual gains from trade of goods and improvements.(1)According to wikipedia, The Latin American Free look at Association (LAFTA) was created in the 1960 Treaty of Montevideo by Argentina, Brazil, Chile, Mexico, Paraguay, Peru, and Uruguay. The signatories hoped to create a common market in Latin America and offered tariff rebates among member nations. LAFTA came into effect on January 2, 1962.When the trade association commenced it had seven members and its main goal was to eliminate all duties and restrictions on the volume of their trade within a twelve year period. By the late 1960s the area of LAFTA had a population of 220 million and produced about $90 one million million of goods and service annually. By the same time it had an average per capita gross national product of $440. The goal of the LAFTA is the creation of a free trade zone in Latin America. It should foster mutual regional trade among the member states, as well as with the U.S. and the Eu ropean Union.(2)Analysis on Element 3According to wikipedia, In economics, principle of absolute advantage refers to the ability of a caller (an individual, or degenerate, or country) to produce more of a good or service than competitors, using the same amount of resources. Adam Smith first described the principle of absolute advantage in the context of international trade, using job as the only input(3). For instance, the capital market of UK is absolute advantage when comparing to the developing countries.According to wikipedia, The law of comparative advantage refers to the ability of a party (an individual, a firm, or a country) to produce a particular good or service at a lower opportunity cost than some other party. It is the ability to produce a product with the highest relative efficiency given all the other products that could be produced(4). For instance, during the end of 19 century and beginning of 20 century, textile industry of UK developed well. However, in the mi ddle and end of 21 century, Chinas textile industry became a comparative advantage because of enhanced efficient by means of adopting unsanded product technologies.Analysis on Element 4According to wikipedia, Protectionism is the economic policy of restraining trade amidst states, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports, and prevent foreign take-over of domestic markets and companies(5). Its a practice of rule imports and exportations with the purpose of shielding domestic industries from foreign competition. Governments adopt protectionism in order to help the country become self-sufficient, to protect new industries, or as a bargaining tool.In terms of tariff which was applied in protectionism, there are two examples. On September of 2010, Chinese government enforce new import duties ranging from 50.3 to 105.4 percent on US chicken lasting for five years, since a investig ation found that US chicken was being sold at low prices a process called dumping(6). Another instance is, according to the webpage, on November of 2009, Brazil would raise cane over U.S. ethanol tariff. The reason for that is Brazil lolly producers say sugar-based fuel is more environmentally sound than electricity or corn ethanol for as an alternative for powering cars(7).Analysis on Element 5Trade barriers are constraints that tend to hinder the motivation to engage in the importing or exporting of goods(8). There are two types of barriers that a government can employ, which are Tariff barriers and Non-Tariff barriers. According to the student guide, Tariffs are taxes or usage duties placed on foreign products to artificially raise their prices and this hopefully, suppresses domestic ask for them.(9) According to wikipedia, Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports but are not in the usual form of a tariff.(10) it can take many an(prenominal ) forms, including quotas, embargoes, exchange controls, import deposits, voluntary export restrains, product standard procedures, subsidies and etc.There are two instances that indicate how tariff barriers influence the global trade. According to the webpage, On September of 2010, chinas commerce ministry announced that it would impose import tariffs on American poultry of up to 105.4 percent(11). Another is, on August of 2010, Mexicos new controversy which includes meats, vegetables and household items face tariffs of 5 percent to 25 percent, which will hurt Texas more(12).Analysis on Element 6In brief, according to the webpage, the universe of discourse Trade Organization (WTO) is an organization which can provide a negotiating forum, offer a set of rules and helps to settle disputes for its memberships between nations. Its main function is to ensure that trade advert as smoothly, predictably and freely as possible(13).According to the publication of European Commission, on 8 December 2003, the EC requested consultations with India on 27 antidumping measures compel on a variety of EC exports, including pharmaceuticals, chemicals, paper, textile and steel. The problems in the Indian cases mainly referred to the highly insufficient injury and causality analysis, the failure to provide meaty disclosure documents and a continuous disregard of arguments presented by EC exporters and the EC. Following the consultations held in February 2004, India opened a review process which has led to the termination of to the highest degree of the contested measures, including those of most economic interest for EC exporters (steel and pharmaceutical products)(14).Analysis on Element 7The aims of EU are following Firstly, Eliminate customs duties and quotas between members. Secondly, establish common external tariff for non members (operated through common commercial policy). Thirdly, establish free movement of people, service, goods and capital between members, meanwh ile, reduce anti-competitive practices. Fourth, fit in with countries outside union to increase trade. Further, move towards full economic and monetary union. Lastly, develop common foreign, security and defense policy(15).In respect of trade, EU has back up to use one single currency which promotes the development of trade. Regarding to administration, the applying of Schengen Visa decrease administrative impediments and encourage the flow of individuals and business. Moreover, it implements unified foreign policy when confronted with trade disputes.Analysis on Element 8The Balance of Payments can effectively be broken down into two parts. According to the webpage, The Current Account records international trade in goods and service, international income flows and current transfers. The Capital Account and Financial Account form the counter part to this, recording the changing pattern in the international ownership of assets. While the Financial Account records changes in the cro ss-border flows of assets the international Investment Position measures the total stocks of foreign assets and liabilities held by a nation(16).The trade in goods proportion is the difference between the value of goods exported and the value of goods imported. The trade in services is recorded in the same way, with credits to the Current answer for reflecting services exports and debits services imports. Net income flows reflect international payments associated with the ownership of the factors of production (land, labor and capital). Current transfer records a miscellaneous set of net payments including workers remittances, social security, foreign upkeep and contributions to international organizations(17).In 2009, the current draw deficit stands at15.5 million. The deficit of trade in goods account falling to81.9 billion. The trade in services account has shown a surplus of 49.9 billion. The investment income balance rose to a record level of 32 billion. The deficit of tra nsfers account reached a record of 14.8 billion. Additionally, The capital account represented in 3.2 billion and financial account had a net inflow of 5.6 billion(18).Analysis on Element 9According to the bar map of trade in good and trade in services, the UK trade was fluctuated over the last 30 years. The UK trade has really only been in surplus in the very early 1980s which around 3 billion. However, after that, there has a apparent drop from 1982 to 1989 where at a bottom in electronegative 25 billion in 1989. Then, from 1990 to 1997, it roughly remained same which around 10 billion deficits. What is worse, the UK trade has a substantial decline which from 21 billion deficits in 1998 to 90 billion deficits in 2008 during the ten years. In 2009, the trade of good has a deficit around 81.9 billion(19).As for the trade in services, the UK has traditionally been in surplus and certainly has been so from 1976-1997. The services trade approximately remained surplus 4 billion during four years which from 1980 to 1984. Then, it peaked at 7 billion within 3 years which from 1985 to 1987 during the 1980s. From 1991 to 1997, it ascended gentlely from 4 to 11 billion deficit. However, there was a sharply growth after 2005 which from 25 billion positive to 56 billion positive in 2008. In 2009, it dropped to 49.9 billion trade in services.Analysis on Element 10According to the wikipedia, The exchange rates between two currencies specify how much currency is worth of a foreign nations in terms of the home nations currency(20). It has two forms which are fixed exchange rate and floating exchange rate.As to the floating exchange rate, according to the student guide, if the value of currency rises imported goods will be cheaper, therefore the trade in goods is likely to move into deficit. If the value of a currency falls, domestic goods and services will be dearer in domestic markets. This should mean an improvement in trade in goods(21). With regarding to the fixed exch ange rate, according to the student guide, a persistent surplus could be dealt with by measures which allow domestic consumers to feel confident to leverage more. If the domestic economy cannot respond then imports would probably increase and exports might become less competitive.(22) Therefore, it will lead to a decrease of trade in goods. If the opposite were the case, a persistent deficit then measures could be used to restrict domestic demand and also to place greater restrictions on imports.(23) Hence, an increase of trade in goods will be emerged with that.For example, it is suggested that the American government has a requirement of increasing the value of RMB (increasing the exchange rate of RMB to change dollar) in 2001. In the end of 2006, Chinese government put the policy to take the exchange rate, it means originally 100 US dollars exchange 826 RMB, now only swop about to 800 RMB. In this way, they can make use of less money to change more products of Chinese in order t o offset the quota of currency.Analysis on Element 11The single currency is usually a double edge sword, which both bring the UK government strengthens and weaknesses.AdvantagesTo the UK economy, keeps interest rates lower, the commitment to low inflation should allow the economies to operate lower cost.Increase foreign investment, if the UK join the single currency system, direct inward investment should be attracted because the reduction of uncertainly there is not the have to calculate demonstrate the UK pound(24).DisadvantagesFor the UK government, changes from old currency may be costly the government needs spend additional money, like, grease ones palms the new equipment and staff training.The UK government will lose the independent monetary policy, since when UK adopt the single currency, the scope for fiscal policy adjustments is restricted by need to stay within 3% of GDP(25).Analysis on Element 12To individuals, adopting the single currency could eliminate cost on excha nge currency. No matter Tourists or citizens, they do not need to care about more money will be spend because of changing exchange rate.Besides, it renders purchasers convenient and efficient shopping, most essentially, a wide range of selections of goods and considerations without additional expenditure.To the business, utilizing a single currency intensifies stiff competition among members within EU. By the contrast, it also provides corporations with increasingly opportunities and possibilities of expansion, so that these firms could produce their product to wider within EU. Whats more, it decreases the cost of foreign investment to dedicate domestically.Analysis on Element 13According to wikipedia, Least Developed artless (LDC) is the name given to a country which, according to the United Nations, exhibits the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world. A country is classified as a Least Develope d Country if it meets three criteria* low-income (three-year average GNI per capita of less than US $905, which must exceed $1,086 to leave the list)* humans resource weakness (based on indicators of nutrition, health, education and adult literacy) and* economic vulnerability (based on instability of agricultural production, instability of exports of goods and services, economic importance of non-traditional activities, merchandise export concentration, handicap of economic smallness, and the percentage of population displaced by natural disasters)(26)For instance, Bhutan and Maldives in Asia is confronted with several problems which include shortage of education investment, out-dated medical treatment and high misadventure of employment.Analysis on Element 14NICs like Kiribati may face the problem of indebtedness. According to the student guide, As the living standards and per capital income of NICs approach those of the get along economies they will certainly find it difficult to sustain growth, they may well have benefited from aid from the World Bank or IMF. Were they clever enough to pay off all debts they might have owed externally or as close to it as they could before being exposed to some fairly tearing competition(27).In Cambodia, the unemployment is usually very high with very little industry because most people work on their own small plots of land. The social, cultural and sacred patters within these countries are barriers to mobility and change(28).Analysis on Element 15The impact of multi-national firms on NICs and LDCs may be broadly similar. The benefits have increase employment, the new methods and engine room and contribute to economic growth, to name just a few. At the same time the problems have which may eliminate domestic competition, occupy the local temper resources and the profits are mainly transfer back to Home County(29).Volkswagen as the first group company into Chinese marketing, they merger the Shanghai automobile firm an d established the Shanghai Volkswagen Company. The professional training designed for Chinese worker brought in the updated technology and management skills. The other instance is about Samsung Electronics. The organization set up their manufactory in developing countries like India, it may use up the natural resources and give extreme detrimental environmental influences on host country. abridgmentAll those are the 15 key elements about the world economy. At present, the global economy tends to integration, so to realize world economy is very inevitable for countries, businesses, and even individuals.Reference(1) http//en.wikipedia.org/wiki/Free_trade(2) http//en.wikipedia.org/wiki/Latin_American_Integration_Assosiation(3) http//en.wikipedia.org/wiki/Absolute_advantage(4) http//en.wikipedia.org/wiki/Comparative_advantage(5) http//en.wikipedia.org/wiki/Protectionism(6)http//www.cbsnews.com/stories/2010/09/27/business/main6904479.shtml(7)http//domesticfuel.com/2010/04/06/brazil-eli minates-tariff-on-ethanol-imports/(8)http//www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp(9) Economics 2 The World Economy by China Mordern Economic print House Page34.(10) http//en.wikipedia.org/wiki/Non-tariff_barriers_to_trade(11) http//www.nytimes.com/2010/09/27/business/global/27yuan.html(12) http//www.mysanantonio.com/business/local/article/Mexico-s-new-tariff-list-may-hurt-Texas-621156.php(13) http//www.wto.org/english/res_e/doload_e/inbr_e.pdf(14) http//trade.ec.europa.eu/doclib/docs/2007/may/tradoc_134652.pdf(15) Economics 2 The World Economy by China Mordern Economic create House Page 66.(16) http//en.wikipedia.org/wiki/Balance_of_Payments(17) http//www.statistics.gov.uk/elmr/09_09/downloads/ELMR_Sep09_Chamberlin.pdf(18) United Kingdom Balance of Payments The Pink Book(19) United Kingdom Balance of Payment-The Pink Book(20) http//en.wikipedia.org/wiki/Exchange_rate(21) Economics 2 The World Economy by China Mordern Economic make House Page 9 1and 92.(22) Economics 2 The World Economy by China Mordern Economic create House Page 103.(23) Economics 2 The World Economy by China Mordern Economic Publishing House Page 103.(24) Economics 2 The World Economy by China Mordern Economic Publishing House Page 112.(25) Economics 2 The World Economy by China Mordern Economic Publishing House Page 113.(26) http//en.wikipedia.org/wiki/Least_Developed_Country(27) Economics 2 The World Economy by China Mordern Economic Publishing House Page 134 and 135.(28) Economics 2 The World Economy by China Mordern Economic Publishing House Page 139.(29) Economics 2 The World Economy by China Mordern Economic Publishing House Page 148-149.