Economic Crises, Integration, and Global Trends: Key Insights
Picture 1 Questions:
1. Origin of Economic Crises: Juglar Cycles or Monetary Theories
Juglar Cycles suggest economic crises follow patterns of expansion and contraction due to investment changes. These cycles usually last 7-11 years and reflect overconfidence or fear in markets. Monetary theories explain crises as failures in money supply management. For example, too much money can cause inflation, while too little causes recessions. Both theories highlight the importance of balance in investments and money policies. Governments must monitor these factors to avoid crises.
2. 5 Specific Characteristics of Economic Crises: COVID-19
The COVID-19 crisis disrupted global supply chains as factories and borders closed. Consumer demand dropped for many products, except essentials. Unemployment rose as businesses shut down temporarily or permanently. Governments provided stimulus packages to stabilize economies. Debt levels increased as countries borrowed heavily to fund recovery. Global trade and tourism were severely affected during the crisis.
3. Balance of Payments: Financial Account Sections
The financial account records cross-border investments. It includes direct investments, like setting up companies abroad, and portfolio investments, like buying foreign stocks. Another section tracks loans and borrowing between countries. Changes in foreign currency reserves are also included. A surplus means more money is coming in, while a deficit means money is leaving. It reflects a country’s financial ties with the world.
4. 4 Disadvantages of Economic Integration Projects
Economic integration can reduce local industries’ competitiveness if foreign goods dominate. Some jobs are lost as companies move to areas with lower costs. Wealthier nations may benefit more than poorer ones, creating inequalities. Countries lose some control over their policies, like trade or taxes. These challenges make integration difficult without proper balance and planning.
5. Video: International Expansion of India (5 Characteristics)
India’s international expansion focuses on technology exports, especially IT services. It invests heavily in foreign countries through companies like Tata. Indian companies expand due to skilled labor and cost advantages. The government supports globalization with trade policies. Expanding middle-class consumption attracts foreign investors. This global presence boosts India’s economy.
6. Differences Between Malthus and Present Economists on Poverty
Malthus believed poverty was natural because population growth would outpace resources. He thought limiting population was key to reducing poverty. Modern economists focus more on education, technology, and policies to reduce poverty. Today, poverty is linked to inequality and lack of opportunities, not just resources. Programs like social safety nets and investments in skills are modern solutions. This shows a shift from survival to improving livelihoods.
7. Virtuous Cycle of Asian Countries to Overcome Poverty
Many Asian countries invest in education, creating a skilled workforce. This attracts foreign investments in industries like technology and manufacturing. Economic growth creates jobs, reducing poverty levels. With rising incomes, people consume more, further boosting the economy. Governments also focus on infrastructure to support growth. This cycle has helped countries like South Korea and Singapore thrive.
8. 4 Characteristics of Economic Integration Projects: Economic Union
An economic union allows free movement of goods, services, capital, and labor between member countries. It adopts common trade policies for dealing with non-member countries. There’s a unified currency or financial system, like the Euro in the EU. Member states coordinate policies like taxation and social programs to ensure balance. This creates a deeper level of economic cooperation.
9. 4 Factors Affecting Balance of Payments
Trade balance influences whether more is exported or imported. Foreign investments, like companies setting up businesses, affect inflows and outflows. Currency exchange rates impact how competitive exports are globally. Government policies, like tariffs or subsidies, also shift the balance. Natural events like pandemics or wars can disrupt the flow of trade and finance.
Picture 2 Questions:
1. Origin of Economic Crises: Keynes or Paul Samuelson
Keynes argued that government intervention is essential to manage demand during economic downturns. He believed that without intervention, recessions would last longer. Samuelson built on Keynes’ ideas and stressed long-term planning using monetary and fiscal tools. Crises could arise from insufficient demand or overproduction. Both emphasized balancing policies to maintain employment and growth. This approach shaped modern economic policies.
2. 5 Specific Characteristics of Economic Crises: 2008
The 2008 crisis was triggered by the collapse of the housing market. Banks issued risky loans to borrowers who couldn’t repay. Financial institutions failed, causing a global panic. Stock markets and economies crashed. Governments provided massive bailouts to stabilize the system. This crisis revealed weaknesses in regulation and the need for better oversight.
3. Balance of Payments: Current Account (Sections)
The current account tracks trade (exports and imports), services like tourism, and investment income. It also includes remittances sent by workers abroad. A surplus means a country earns more than it spends, while a deficit is the opposite. This account shows a country’s economic position globally. A balanced account is key to financial stability.
4. Four Characteristics of Economic Integration Projects
Integration reduces barriers like tariffs between member countries. It allows free movement of goods and labor, boosting trade. Policies are harmonized, making it easier for businesses to operate. Integration creates stronger economic ties but requires balancing member nations’ interests. This helps smaller economies grow in competitive markets.
5. 4 Factors Affecting Balance of Payments
Export-import levels affect whether a country has a trade surplus or deficit. Foreign investments bring money in but outflows occur with overseas spending. Currency values impact the affordability of exports and imports. Policies like tariffs or sanctions shift trade and finance flows. These factors collectively shape a country’s economic relations.
6. 4 Advantages of Economic Integration Processes
Integration increases trade by removing barriers, like tariffs or quotas. It attracts foreign investments, boosting economies. Citizens benefit from more job opportunities and better goods at lower costs. Shared resources, like technology, enhance productivity. Integration also fosters peace and cooperation between nations.
7. Video: International Expansion of China
China expands globally by investing in infrastructure projects like the Belt and Road Initiative. Its focus on manufacturing exports makes it a global supplier. Chinese companies invest abroad, buying businesses and technologies. China offers cheap loans to developing nations, building ties. This global reach strengthens its economy and influence.
8. Are Poor Countries Catching Up?
Some poor countries are catching up through technology and education. Investments in infrastructure improve their productivity. Trade agreements provide access to global markets. However, many still face challenges like corruption, inequality, and weak institutions. Catching up requires long-term reforms and global support. Success varies greatly between nations.
9. Which Factors Are Part of the Multidimensional Index of Poverty?
The index measures poverty through education, such as years of schooling. It looks at health indicators like child mortality and nutrition. Living standards, including electricity, housing, and water access, are included. It reflects multiple factors, not just income, to give a clearer picture of poverty. This helps create better policies to reduce it.
Picture 1:
- 1. Some Asian countries have been successful due to:
- They have quite high saving ratios.
- 2. According to Malthus, the main reason for poverty is:
- Exponential increase of population.
- 3. Each month, Ima Nowhere sends her paycheck to Poland. This is part of:
- Current account.
- 4. Which author is associated with the “Pendulum” vision:
- Juglar.
- 5. Chinese “BRI” project means:
- Belt Road Initiative.
- 6. One main difference between IMEC (India) and BRI (China):
- IMEC shows a much higher level of autonomy for countries involved.
- 7. If the dollar appreciates relative to foreign currency:
- The quantity demanded of dollars will decrease.
- 8. If trade coverage ratio equals 1.4, it means:
- Value of exports are higher than value of imports.
Picture 2:
- 1. Which is true about global economic integration projects:
- IMEC will invest around 1.3 trillion dollars.
- 2. Which important factor is associated with Millennium Development Goals:
- Improve gender equity.
- 3. NAFTA would be an example of:
- Free trade area.
- 4. One of the “winners” with Transpacific Agreement would be:
- Vietnam.
- 5. Three components of the financial account:
- Bonds + Portfolio investment + “One-way” transfer payments.
- 6. Three components of the current account:
- Goods + Services + Transfer of dividends.
- 7. Common market integration project would include:
- Free movement of labor.
- 8. Which is true about the 2008 and COVID economic crises:
- 2008: Banking sector was very much affected.