ICTM Module Delivery Team | My Assignment Tutor

1Session 3: The Global EconomyICTM Module Delivery Team By the end of the session, the student will be able to: Understand how to measure the size of the globaleconomy Recognise the importance of economic growth Identify current trends in the changing world economy Describe the growing importance of international tradeICTM Module Delivery Team1 22ICTM Module Delivery Team ICON College of Technology and ManagementGlobal Economies and International Markets Weeks 3 Activities PlannerWk 3StepsDescriptionExample Activity TypesTool that will suport this activity1Introduction(Informing learnersof the objective)Understand how to measure the size of the global economyRecognise the importance of economic growthIdentify current trends in the changing world economyDescribe the growing importance of international tradeDiscussion of the challenges of internationalCase study on importance of internationaltradeICON VLE: GDP and the quality of life (Hamiltonand Webster, 2015:313)GDP and the quality of life (Hamilton andWebster, 2015:313) also available athttps://books.google.co.uk/books?id=lM4YBwAAQBAJ&pg=PA313&dq=Hamilton+2008+International+Business+Environment&hl=en&sa=X&ved=2ahUKEwibs52s3dfrAhXHQkEAHaaKCNIQ6AEwAHoECAMQAg#v=onepage&q=Hamilton%202008%20International%20Business%20Environment&f=false2Lectures anddelivery methodSession 3: The Global Economy with a focus on the following topics Sizeof global economy, Economic growth and International trade: Instructorled with Q&A for students engagementPresentation, video on “types of economicsystem’Kaltura – My Media url to video.Lecture material on ICON VLE3ActivityGroup work on a case study ‘GDP and quality of life’ and another casestudy on JP Morgan, subprime mortgages, and the global financial crisisGroup reports of GDP and equality and JPMorgan case studyBreakout Rooms in Kaltura4Reflection andFeedbackIndividuals summarise the importance of global economic growth andimpact of changes towards economic development and internationalmarketFeedback; Reflective journal – students keep arecord of the results of the activities from thecase studyICON VLE and Kaltura5Consolidation andIntegrationStudents share their summaries of the importance of global economiesand international market. These summaries are uploaded onto the ICONVLEStudents are divided into groups in breakoutroom to share their summaries of theimportance of environmental factors on anorganisation of their choiceKaltura and ICON VLE Questions to Think What is going tohappen to worldeconomy next year? Which economy willgrow the fastest? Which are the richest? Which are the poorest? Where are the newmarkets of the world? What sort of goods andservices do theyrequire?ICTM Module Delivery Team3 43 The common method of measuring the size of aneconomy is by calculating the GDP (Gross DomesticProduct). This is the market value of total output of goodsand services produced within a nation, by bothresidents and non-residents, over a period of time,usually a year. In comparing the relative size of differenteconomies, one obvious problem is that thecalculation of GDP is in country’s national currency.A normal currency is required and normally theUS$, using foreign exchange currency to convert.ICTM Module Delivery Team GDP tells us the absolute size of an economy andwill indicate that, in nominal terms. GDP also only measures activity that takes place inthe formal, officially recorded, economy. If anelectrician does jobs for cash and does not declarethe income to the tax authorities, than there isadditional output in the economy but it is notrecorded. This is an example of ‘Shadow Economy’. (Hamilton & Webster, 2015)ICTM Module Delivery Team5 64 Explain why countries in sub-Saharan Africa havethe highest average shadow economies?ICTM Module Delivery Team Another problem is the GDP figures do not takeinto account environmental degradation and thedepletion of natural resources. For example, when oil is taken from the ground, itis irreplaceable. The value of that oil is added toGDP, but the depletion of reserves is not accountedfor even though it will affect the welfare of futuregenerations. This oil when turns into petrol that again adds toGDP, but the damage done to atmosphere when weuse it (pollution).ICTM Module Delivery Team7 85 According to the International Monetary Fund(IMF), world GDP between 2006 and 2014 grew onaverage by 3.5 percent per year (Hamilton &Webster, 2015) Case Study: GDP and the quality of life (Hamiltonand Webster, 2015:313) https://books.google.co.uk/books?id=lM4YBwAAQBAJ&pg=PA313&dq=Hamilton+2008+International+Business+Environment&hl=en&sa=X&ved=2ahUKEwibs52s3dfrAhXHQkEAHaaKCNIQ6AEwAHoECAMQAg#v=onepage&q=Hamilton%202008%20International%20Business%20Environment&f=falseICTM Module Delivery TeamThere are three identifiable types ofeconomy in which organisations operate: local, national and international.An economy is largely defined in terms of itsgeographical reach and its market size. Local canmean a town, a region or regions, whereas nationalconfines itself to its recognised governmentalboundaries. International businesses operate in morethan one national market, and the larger ones operateglobally.ICTM Module Delivery Team9106 Whatever geographic level we are considering, allbusinesses have to answer the followingquestions: What is to be produced? How will it be produced? For whom will it be produced?This helps in considering the GDP of an economybased on production and profit.ICTM Module Delivery Team The fundamental problem of economics is theissue of scarcity. Therefore we are concernedwith the optimal use and distribution of thesescarce resources. Wherever there is scarcity weare forced to make choices. If we have £20, wecan spend it on an economic textbook, or we canenjoy a meal in a restaurant. Therefore, manychoices involve an opportunity cost – having tomake choices between the two.ICTM Module Delivery Team11127 There are broadly three types of economicsystem which can be recognised. These aregenerally defined by the level of governmentcontrol over the economy’s resources and howthose resources are distributed. The free market or capitalist system The planned or command economic system The mixed system (including transitionaleconomies)ICTM Module Delivery Team The free market or capitalist systemFree-market systems (sometimes called laissezfaire economies – meaning ‘to leave alone’) cameabout largely as the result of economic evolution.https://www.youtube.com/watch?v=4V9TZtzEpIwICTM Module Delivery Team13148Centrally Planned System Characteristics: The means of production are owned by the state‘on behalf of the people’. Planning is centralised. Prices of goods sold by the state are determinedby the planning authority. Capital formation – the formation of producergoods, which are necessary to produce othergoods – is determined by the central planners. https://www.youtube.com/watch?v=Ve6K10-Yx_MICTM Module Delivery TeamThe Mixed Economy:This type of economy is the one that is identifiedwith the so-called Western economies and issometimes called a ‘first-world economy’. Thedivision of the world’s economies in this way cameabout through observation of the global political andeconomic interrelationships. Private versus Public These first-world economies are knownas mixed economies as they are partially freemarket and partly planned from the centre. They are divided between the public sector and theprivate sector. ICTM Module Delivery Team15169Transitional Economies:A transition economy or transitional economy isan economy which is changing from a centrallyplanned economy to a market economy. Transitioneconomies undergo a set of structuraltransformations intended to develop market-basedinstitutions.https://www.youtube.com/watch?v=sC3idPS3T7cICTM Module Delivery Team Regulation plays an important role at both adomestic and an international level. It is a bigelement in the financial sector’s externalenvironment because of the effect it can haveon their sales turnover, costs, and profits.Review Question:Why it is vital for business to have confidencein the international payment system?ICTM Module Delivery Team171810 Case Study: JP Morgan, subprime mortgages, andthe global financial crisis Questions: Advance reasons for JP Morgan buying subprimemortgage loans from other financial institutions. Explain the term securitisation and relate this tothe subprime mortgage loans bought by JPMorgan. Discuss whether the case supports PresidentObama’s view that the bank was pretty wellmanaged.ICTM Module Delivery TeamL. Hamilton, P, Webster, (2015). The InternationalBusiness Environment. Third Edition. OxfordUniversity Press. Also available at:https://books.google.co.uk/books?id=lM4YBwAAQBAJ&pg=PA313&dq=Hamilton+2008+International+Business+Environment&hl=en&sa=X&ved=2ahUKEwibs52s3dfrAhXHQkEAHaaKCNIQ6AEwAHoECAMQAg#v=onepage&q=Hamilton%202008%20International%20Business%20Environment&f=falseICTM Module Delivery Team192011ICTM Module Delivery Team21