Answer to Question #97419 in Microeconomics for Niya

Question

Discuss the impact of changes in global trade and investment on the global economy.

Answer 1

Impact of changes in global trade and investment on the global economy.

Global trade, also known as international trade, is simply the import and export of goods and services across international boundaries. Global trade has resulted in a greater interconnection of markets around the world and increased communication and awareness of business opportunities in the most remote corners of the world. More investors can access new investment opportunities and explore new markets at a greater distance than before. Global trade creates long-term mutually beneficial relationships.

The global economy is the economy of the humans of the world, considered as the international exchange of goods and services that is expressed in monetary units of account.

Global trade allows for specialization and reduces costs for consumers. Countries can focus on what they are best able to do: engage in activities with the lowest opportunity costs. By focusing on their comparative advantages, they can maximize production and efficiency, increasing their potential for profit and economic growth. Ex: The Portuguese sell wine to England and buy wheat from England

Countries can focus on what they are best suited to do and consider about lowest opportunity costs. Focusing on their comparative advantages means can maximize production and efficiency. This leads to greater potential for economic growth.

Developing Countries benefit More Than Developed Countries. The global trade impact on the developing country benefits hugely from imported technology and capital investments in basic infrastructure and industry. Ex: USA trading with China, China’s economy’s grown by a factor of 64, while America’s has grown by less than 1/10th of that. 

Foreign direct investment helps to boost growth, technology transfer, industrial restructuring and growth of global companies at a much higher rate than the growth in world trade. Increased competition from globalization helps to stimulate new technology development,

Globalization enables large companies to reduce costs and prices, which further supports economic growth, although it may cause many small businesses to attempt to compete domestically.

Local economic fluctuations depend on a large number of countries, which can lead to regional or global instability. Multinational corporations and other international organizations pose a threat to national sovereignty. Sharing the benefits of global trade creates inequalities and can cause national and international conflicts.