LESSON 2: THE

GLOBAL ECONOMY
 Intended Learning Outcomes

At the end of this lesson, students are expected to:

1. define economic globalization;
2. identify the actors that facilitate economic globalization;
3. define the modern world system; and
4. articulate a stance on global economic integration.
 INTRODUCTION

• As saying goes “No nation in this world is geographically and

individually complete with resources that its people need.”
• This supports the reality that no country can exist on its own.
Countries produce various products and services and no country
can create all kinds of products.
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 provides
linkages between the regions
and nations of the world in a
system of economic
relationships.
These relationships involve the
exchange of goods and
services, financial flows across
borders, exchanging different
nations' currencies, movement
of people in search of better
standards of living.
 Economy

a system of producing, distributing

and consuming goods and services.
 Components of
Economy
1. GOODS - products that are made to
be sold
2. SERVICES - work done or duties
performed by other person.
PRODUCER - a person who makes
products that are used by other
people consumers (owners &
workers)
CONSUMER - a person who buys
goods and services
 FOUR (4) CATEGORIES OF
ECONOMY

1. Traditional Economy - is a system in which the

allocation of resources and other economic activities
are affected by ritual, custom or habit.
2. Command Economy - is a system organized around a
central authority which makes most of the major
economic decision. The government decide what
products are made, how much is produced and what the
good cost (cuba economy).
3. Market economy - individuals
depends on supply, demand and prices
to determine the answers to the four
economic questions :what to produce,
how to produce, how much to produce
and for whom to produce
 
4.Mixed economy - it is a mixture of
both market and command economy.
 TYPES OF
INDUSTRIES
1. PRIMARY-takes natural resources 2.SECONDARY- they process raw
or raw materials from the earth. materials into finished products
(farming, mining, fishing and etc.)
3.TERTIARY - exchanges and markets the
products of the primary and secondary
industries 4.QUATERNARY - are those parts of the
*like restaurants and supermarkets economy concerned with research, the
gathering and the dissemination of information
and administration
TRADE BARRIERS
1. TARIFFS
- are taxes that are imposed by the government on imported goods or services.
- sometimes also referred to as DUTIES.
- can be implemented to raise the cost of products to consumers in order to make them as
expensive or more expensive than local goods and services.
2. NON- TARIFFS
- are barriers that restrict trade through measures other than the direct imposition of tariffs
- may include measures such as quality and content requirements for imported goods or
subsidies to local producers.
- by establishing quality and content requirements, the government can restrict imports,
because only products can be imported that meet certain criteria.
- most often the criteria benefit the local producers
- Government grant subsidies to keep the price of their goods and services competitive.
3. QUOTAS
- are restrictions that limit the quantity or monetary value of specific goods and services that can be
imported over a certain period of time
- the idea behind this is to reduce the quantity of competitive products in local markets which
increases demand for local goods and services.
- government issued LICENSES that allow companies or consumers to import a certain quantity of a
good or service.

4. VOLUNTARY EXPORT RESTRAIN (VER)

- Similar to quotas, this is where countries agree to limit the number of imports.

 
 Global Trade: benefits
1.Developing gains – goods become available especially in regions where they are hardly produced.
2.Improves standard of living – with the presence of various goods and services coming from all parts
of the world, people can enjoy a very comfortable and convenient life.
3.Accelerate Economic Development – particularly true for the less developed countries.
- they need better machines and proper technologies for their development projects ; electrification,
irrigation, communication, transportation and industrialization.
- In fact, Philippines cannot produce rice without imported inputs like fertilizer, pesticide and irrigation
pump.
4. Generate Foreign Exchange Earnings – the availability of sufficient foreign exchange is vital for the
attainment of economic stability and growth.
- Foreign exchange such as dollars, yens, euros and other industrial materials for our farms and
factories. - we also use foreign currencies for payments of our foreign loans.