NAT I O NAL

AND
WORLD ECONOM
Y
1. WORLD ECONOMY

• The formation of the world economy is a long and

complicated process.
• It includes the division of labor which is the separation of
and the specialization in specific product manufacturing
or providing specific services. This division includes all
people in society and that is why it is also known as
social division of labor.
The reason for its origin in ancient times was that
particular people became better in specific work tasks
and they started to use improved instruments (metal
tools and others).
Geographical conditions that shaped economic activities
such as primitive farming and fruit gathering were also
an important factor in the division of labor.
• The most simple divisions of labor used to be based
on the gender and age of people.
• In antiquity, men used to hunt and fish and women
used to be involved in farming and the gathering of
fruits.
DIVISION OF LABOUR

Second Followin
First Third Fourth
division g
division division division
divisions

• Separation • Separation of • Separation • Separation of • Construction,

of crop- craftsmanship of trade manufacturin transportation,
from farming g tourism and
farming and other branches
stock- appeared
breeding
A national economy is a complex system of
economic activities, grouped together in sectors
and branches that aim to meet the needs of the
society of independent states
A branch groups together homogeneous
production units, that is, units which
manufacture products (or produce services) that
belong to the same item in the economic activity

These branches are often categorized based on

the nature of the goods and services produced,
the processes involved, and the target markets
served
ECONOMY - The totality of all the
branches of material production
and the non-productive sphere
The world economy is a historical originated
system incorporating all national economies.
They are all interconnected through various
economic and political relations.
An especially important feature of the world
economy is the international labor division.
 2. FACTORS FOR DEVELOPMENT
• Еconomy develops under the influence of a complex of factors
• They act in a specific way and determine

What type of economic activity should/can be developed – BRANCH

STRUCTURE

Where should it be positioned – TERRITORIAL STRUCTURE

How should the economic activity be developed and why?

а/ Geographical situation

Fa • Geographical situation
ct
or
R • The location relative to the main trade routes and the international markets
ol determines the possibilities for economic development
e
• Maritime and insular countries like the USA, France, Japan, GB, have
favourable location and high level of development
E • Mongolia, the north of Canada, the isolated Far east of Russia are located far
x. from the world markets and their economies are less developed
b/ natural geographic factors
Fa • Area
ct
or
• It is a basic principle that the bigger the state territory is, the more various the
R natural resources are
ol • Bigger territory enables diversity in localization and development of the economy

e
• Big countries like Russia, Canada, China, the USA, Brazil
E • Vice versa, small countries typically suffer from scarcity of territory
and natural resources and have to import
x.
Fa • Relief
ct
or
R • It can favour or hinder certain economic activities
ol
e
• Flat areas provide excellent conditions for farming,
construction, industry, transportation infrastructure etc.
E Mountainous terrains hinder some of these activities and
x. the costs are higher, but they are good for tourism
Fa • Mineral resources
ct
or
R • They are fundamental for the development of industry
• They supply industrial production with important raw materials
ol
e
• The development of many industrial branches is related to the location of the
mineral deposits - extractive industry, power generation, metallurgy
E • Thanks to the international relations and trade this dependence decreases. A
x. typical example is Japan - lack of materials and highly developed economy
Fa • Climate
ct
or
R • It plays the leading role for farming and is very
ol important for transportation and tourism
e
• Temperate climate favours growing cereals,
subtropical climate citruses and olives, tropical
E climate - bananas, coffee etc. It can favour the
x. development of sea end mountain tourism
Fa • Water resources
ct
or
R • Human life and anthropogenic activity are
ol impossible without hydro resources
e
• A big part of Australia is covered by deserts and
E there is no water - they are uninhabited and the
x. continent has the smallest population number
Fa • Soils
ct
or
R • They are important for the development of farming and
ol feeding the population
e

• The territories covered with fertile soils predetermine

E development of farming - Europe, the USA, East China
x. etc
Fa • Bioresources - flora and fauna
ct
or
R • They supply the economy with important raw
ol materials – wood, fodder, fibres etc
e
• Raw materials for a big variety of consumer
E goods
x.
c/socio-economic
Fa • Implementation of science and technological innovations (technological progress)
ct
or • New synthetic materials are produced, computerized manufacturing process in
R factories, automatized and robotized production lines
• New species of crops and breeds of animals are created
ol • Cheaper and higher quality production
e
• Countries that invest in the science and technology are leaders in economy - the
USA, Japan, Germany, France etc
E • Most technological innovations are applied in the developed countries
x.
Fa • Transportation
ct
or
• Modern transport ensures fast movement and 'brings together' the place of
R production and the place of consumption
ol • Economy cannot exist without it
e

E • The best developed countries have excellent transportation network - the

USA, the European Union, Japan
x.
Fa • Markets
ct
or • This is where the consumer goods and services meet the
R consumers
ol • The proximity to markets stimulates production
e

E • A typical example is the food and beverage industry

x.
d/ demographic
Fa • Population number
ct
or
R • Man is the producer of various goods and services
ol • Bigger population number provides more labour force
e
• Countries with big population number have enough labour force
• When the economy of a region is less developed and cannot provide jobs migration
E of population happens
x.
Fa • Age structure
ct
or
• Most important is the share of the population in an active age
R • The share of population in pre-economically active age and post-
ol economically active age is also important
e
• The economically active population produces the goods and services which
are shared in the entire population
E • Too many people in the other two groups is an unfavourable economic factor
x.
Fa
• Qualification and education
ct
or
R • It determines the quality of the labour force
ol
e

• Countries with well-developed educational system can rely on

E specialists in all branches of economy
x. • They develop sophisticated economic activities that bring high income
e/ ecological
Fa • environmental factor
ct
or • More and more important in modern times
R • The factor limits the overconcentration of industrial activities as well as stimulates the
modernization of facilities, or it forces closure or displacement of environmentally unfriendly
ol industries.

e
• The population in many regions does not accept the development of polluting productions –
E metallurgy, chemical industry etc

x.
• !!!!!!! HISTORIC FACTOR!!!!
 3. NATIONAL ECONOMY. BRANCH
STRUCTURE
THE BUILDING ELEMENTS OF THE WORLD ECONOMY ARE THE NATIONAL
ECONOMIES OF ALL COUNTRIES.
THE NATIONAL ECONOMY OF EVERY COUNTRY IS A HISTORICALLY FORMED
SYSTEM OF SOCIAL AND ECONOMIC RELATIONS WITHIN THE STATE
BORDERS.

THE STRUCTURE OF EVERY ECONOMY CONSISTS OF

THREE SECTORS
(NEXT SLIDE)

EVERY SECTOR INCLUDES PARTICULAR ECONOMIC FIELDS WITH SPECIFIC

ECONOMIC ACTIVITIES
SECTORS OF ECONOMY

Primary sector: Secondary sector: Tertiary sector:

Extractive Processing Services
• Extraction of • Industry– Power • Transportation,
mineral resources generation, Trade, Tourism,
– oil, gas, ores, Metallurgy, Science,
nonmetals; Engineering, Education,
• Agriculture; Chemical Finances,
• Logging; industry, Light Insurance, Health
• Fishing and and Food-and- care, Sports,
Hunting; Beverage Culture,
• Salt extraction. industry Government
•
4. TYPES OF ECONOMY

Command Economic System

A command economic system is characterized by a

dominant centralized power (usually the government)
that controls a large part of all economic activity. This
type of economy is most commonly found in
communist countries.
4. TYPES OF ECONOMY

Command Economic System

It is sometimes also referred to as a planned economic

system because most production decisions are made by
the government (i.e., planned), and there is no free
market at play.
Economies that have access to large amounts of valuable
resources are especially prone to establish a command
economic system.

In those cases, the government steps in to regulate the

resources and most processes surrounding them.
In practice, the centralized control aspect usually only covers
the most valuable resources within the economy (e.g., oil,
gold).
Other parts, such as agriculture are often left to be regulated
by the general population.
A command economic system can work well in theory, as
long as the government uses its power in the best interest of
society.

However, this is, unfortunately, not always the case. In

addition to that, command economies are less flexible than
the other systems and react slower to changes, because of
their centralized nature.
Market Economic System

A market economic system relies on free

markets and does not allow any government
involvement in the economy.
In this system, the government does not control
any resources or other relevant economic
segments.
Instead, the entire system is regulated by the
people and the law of supply and demand.
The market economic system is a theoretical
concept.

That means, there is no real example of a pure

market economy in the real world.

The reason for this is that all economies we know

of show characteristics of at least some kind of
government intervention.
For example, many governments pass laws to regulate
monopolies or to ensure fair trade, and so on.

In theory, a free market economy enables an economy

to experience a high amount of growth.

In addition to that, it also ensures that the economy and

the government remain separate.
At the same time, however, a market economy allows
private actors to become extremely powerful, especially
those who own valuable resources.

Thus, the distribution of wealth and other positive aspects

of the high economic output may not always be beneficial
for society as a whole.
5. E C O N O M I C INDICES

а/ Gross Domestic b/Gross National

c/ GDP per capita
Product (GDP) Product
• The sum of all • GDP and
goods and investments
services produced abroad
per one year in a
particular
geographical
entity (region,
state) which is
calculated in
currency
ACCORDING TO THE INTERNATIONAL MONETARY FUND, THESE ARE THE HIGHEST RANKING COUNTRIES IN THE WORLD IN NOMINAL GDP:

United States (GDP: 20.49 trillion)

China (GDP: 13.4
trillion)
Japan (GDP: 4.97
trillion)
Germany (GDP: 4.00 trillion)
United Kingdom (GDP: 2.83 trillion)
France (GDP: 2.78
trillion)
India (GDP: 2.72
trillion)
The three largest economies in the world as
measured by GDP are the United States, China, and
Japan.

Economic growth and prosperity are impacted by a

wide array of factors,
namely investment in workforce education,
production output (as determined by investment in
physical capital), natural resources, and
entrepreneurship.
The economies of the U.S., China, and Japan all
have a unique combination of these factors that
have led to economic growth over time.
No GDP, 2020 World bank GDP per capita, 2020 World bank

1 USA Luxembourg
2 China Switzerland
3 Japan Ireland
4 Germany Norway
5 Great Britain USA
6 India Singapore
7 France Denmark
8 Brazil Iceland
9 Italy Qatar
10 Canada Australia
***It is worth noting that the COVID-19
pandemic has had a significant impact on the
global economy, and these rankings may have
changed in 2021.
 GDP

Industry
19%

Agriculture
33%

Industry
Services
Agriculture

Services
48%
 GDP

Agriculture Industry
22% 23%

Industry
Services
Agriculture

Services
55%
 GDP
Agriculture
1%

Industry
24%

Industry
Services
Agriculture

Services
75%
