Greenacre Educational Publications 

Economics HSC Course

 

Topic 1: The Global Economy

 

The focus of this study is the operation of the global economy and the impact of the globalisation process on individual economies. (Economics Stage 6 Syllabus).

 

GLOSSARY OF TERMS

TERM

DEFINITION

APEC

APEC is the Asia - Pacific Economic Co-operation Forum. It was mainly formed in response to the development of trading blocs such as the EU. It aims to promote co-operation among nations.

ASEAN

The Association of Southeast Asian Nations is an organisation of nations from that region, which has agreed to free trade among member countries.

Bank bills

A bank bill generally arises from a short-term credit arrangement designed to enable businesses to obtain funds to finance commercial transactions. The bills are accepted by the bank, that endorses them.

Bond market

The market for existing government securities.

Cash rate

The equilibrium interest rate in the market for exchange settlement funds, also referred to as the money market. The cash rate is targeted by the Reserve Bank through market operations.

Central Bank

A bank whose functions are:

To have sole control over the issue of currency and usually also to control the nation's reserves of gold and foreign exchange;

To act as banker to the central government and to the banking system;

To advise and assist the central government on financial and monetary matters;

To implement officially determined monetary policy by regulating the monetary and banking system.

CERTA

CERTA is a bilateral (between 2 countries) trading agreement, between Australia and New Zealand. The Closer Economic Relations Trading Agreement has led to the elimination of tariffs and other quantitative restrictions on trade between Australia and NZ.

Commonwealth government security

A Commonwealth government security is originally issued as a means to finance a budget deficit. It is a form of borrowing where by the Australian Government agrees to pay the holder a fixed some of money over a period of time and pays the face value of the security on maturity. They include treasury notes and government bonds.

Credit

The lending of money to another party. It involves an agreement to repay the temporary loan.

Debt

Whatever is owed, be it money, goods, or services, by one person or organisation to another.

Derivatives

Derivates are simple financial contracts whose value is linked to or derived from an underlying asset, such as stocks, bonds, commodities, loans and exchange rates. They are international financial instruments for spreading risk or hedging.  They include: futures, options, swaps, forward rate agreements and other hedging instruments.

Equities market

The share market. The rights (shares) to partial ownership of companies are bought and sold.

European Union (EU)

The EU was formed out of the European Community (EC) in 1993. It has 15 member countries, including Britain, Germany and France. There are free trade, capital and labour movements among member countries. In 1999 eleven EU members adopted the EURO as a common currency, initially existing along side each nation’s individual currency.

Foreign currency swaps

A foreign exchange swap is similar to a repurchase agreement, except they involve the exchange of cash for foreign currency. To increase liquidity the Reserve Bank will swap Australian currency for foreign currency. This will increase the supply of Australian currency in the money market. The foreign currency swap will then be reversed at a set time and a set price in the future. The opposite happens if the Reserve Bank wants to reduce liquidity.

Foreign exchange market

The market in which the currencies of different countries are exchanged for one another.

Futures market

The market where agreements are made, that commodities and other products will be bought or sold at a later date, at a fixed price, determined at the time that the contract is agreed to.

Global economy

The Global economy is the world economy. It is the economic activity going on in the world. It includes all production, trade, financial flows, investment, technology, labour and economic behaviour in nations and between nations.

Globalisation

Globalisation is the actual movement, the capacity to move and the potential movement across nations of trade, investment, technology, finance and labour. It also involves the effects of these forces.

Gross World Product

This is the value of the world’s output, also known as World Real GDP. It is the aggregate of individual nation’s outputs.

International Monetary Fund (IMF)

The IMF is the International Monetary Fund. It was set up along with the World Bank after World War II to aid and stabilise International Capital Markets. The IMF was responsible for monitoring and stabilising the international financial system through the short - term financing of balance of payments deficits.

Market operations

Reserve Bank activity in the money market, in implementing monetary policy, through targeting the cash rate.

NAFTA

The North America Free Trade Agreement is an agreement signed in 1992 by Canada, the USA and Mexico to create a trade free zone between these 3 countries.

Purchasing Power Parity

This measure compares the relative prices of products in different countries. The relative value of each county's currency depends on the quantity of goods and services that can be purchased with it. PPP can be measured in absolute terms or relative terms.

Reserve Bank

Australia's Central Bank. The Reserve Bank is responsible for maintaining the stability of the financial system. Financial stability is an essential ingredient in maintaining macro-economic stability and the confidence of the community in undertaking their financial transactions. Within this broad mandate, the Bank also has specific responsibility for the safety and efficiency of the payments system, a responsibility overseen by the Payments System Board

Share market

The market for equities. Shares are bought and sold, which gives claim to the partial ownership of a company.

Terms of trade

The terms of trade is the ratio of a nation's export price to their import price. When the terms of trade improves (increased export prices relative to import prices) a nation is better off, as it can buy more imports with the same level of exports. A worsening of the terms of trade means a nation must sell more exports to purchase the same quantity of imports.

Transnational corporation (TNC)

A TNC is a company that operates in more than one country. It generally has subsidiaries or branches in a number of countries.

World Bank

The World Bank is an international financial institution. The main function of the World Bank is to promote growth and prosperity by providing long-term loans for investment.

World Trade Organisation (WTO)

The main group promoting free trade in the world economy. It grew out of GATT in the 1990's.

 

The following sites provide a lot of information about various countries' economies as well as the operation of major global institutions.

 

The OECD site contains data on main economic indicators around the world, economies in transition, labour force and agriculture statistics, National Accounts, trade in goods and services, and Economic Outlook.

 

The World Trade Organization (WTO) site includes current news, a newsletter, articles, and information on trade topics, for example electronic commerce, the environment and intellectual property.

 

The Worldbank site contains information on global economic prospects, publications, newsletters and current news.

 

The International Monetary Fund site contains data on Government Financial Statistics, Country Information, Finance and Development information, as well as publications and articles. The World Economic Outlook is especially useful as well as individual country profiles.

 

The Asia Pacific Economic Corporation (APEC) - The APEC study centre site includes information on APEC and its role, publications and study materials.

 

The Human Development Report can also be interesting as well as full of information. On the site information includes National Income Accounts, as well as statistics on health, the environment, trends in economic performance, and more, on both developing and industrialised nations.

 

The US Central Intelligence Agency (CIA) apart from playing spies also provides a very good information source about living standards and the economies of many countries in their CIA Factbooks. These can be found at

 

Some excellent articles on The Global Economy can be found at

 

A great resource for teachers and students is a powerpoint presentation on the

Global Financial Crisis (2009)

You are required to complete a casestudy of an economy in the global economy. The following is a powerpoint presentation on the Russian Economy. Further information on Russia can be found in the HSC economics workbook.

The National Library of Australia has a number of sources of economic articles, including country studies (such as China), and statistics on its website at

·         http://pandora.nla.gov.au/subject/3

The Reserve Bank of Australia site has many articles, discussion papers and speeches, that are relevant to not only monetary policy but all areas of economics.

Especially good are papers presented at the RESERVE BANK OF AUSTRALIA 2002 CONFERENCE on 27–28 May 2002 :-

·         Globalisation, Living Standards and Inequality: Recent Progress and Continuing Challenges

Reserve Bank of Australia -- http://www.rba.gov.au/

 

Useful resources for this topic and other topics in the HSC course can be found at:

The site contains information about two excellent workbooks that provide activities for students to do (with the answers), as well as practice multiple choice questions. The casestudy on globalisation in the HSC workbook is highly recommended. These are available now. Students and teachers can purchase these books from the site.

There are also overhead masters and powerpoint slides available on the HSC topics. These are an excellent source of information and a great time saver for teachers.

Go to HSC Topic 2 - Australia's Place in the Global Economy

Return to HSC Economics homepage

Last modified 12th June 2009
Comments and enquiries to Tony Stokes