GLOBAL ECONOMY (CONTEMPORARY WORLD)

The global economy has changed significantly over the past few decades, in the way that it is organised and governed by collaborating nations. These changes have repercussions that not only affect the flow of goods and services between countries, but also the movement of people. As we’ve seen on occasions over the last century, too great a fluctuation in this international economic system can lead to a global economic crisis.

So what exactly is the global economy, how does it function, and how does it affect our lives? Here we take a closer look to help you understand the complexities of the force that governs the modern world!

What is a global economy?
The global economy refers to the interconnected worldwide economic activities that take place between multiple countries. These economic activities can have either a positive or negative impact on the countries involved.

The global economy comprises several characteristics, such as:

Globalisation: Globalisation describes a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration, and transportation. These developments led to the advent of the global economy. Due to the global economy and globalisation, domestic economies have become cohesive, leading to an improvement in their performances.
International trade: International trade is considered to be an impact of globalisation. It refers to the exchange of goods and services between different countries, and it has also helped countries to specialise in products which they have a comparative advantage in. This is an economic theory that refers to an economy's ability to produce goods and services at a lower opportunity cost than its trade partners.
International finance: Money can be transferred at a faster rate between countries compared to goods, services, and people; making international finance one of the primary features of a global economy. International finance consists of topics like currency exchange rates and monetary policy.
Global investment: This refers to an investment strategy that is not constrained by geographical boundaries. Global investment mainly takes place via foreign direct investment (FDI).
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