Question

Explain how the world's economy is integrated and connected globally. How does these connections create wealth in some parts of the world, and poverty in some parts.

Answer 1

The economic activities of many countries are interconnected and thus can affect other countries positively or negatively. Many economies are growing and they are growing at different pace. The economies are integrated and connected globally in many ways, for example , through foreign direct investment, reduction of trade barriers, lowering costs of doing business etc.

These interconnections may create wealth in some parts and poverty in other parts of the world as well as with in the country. When trade takes place the developing countries will be forced in to the production of goods with inelastic demand with respect to both income and prices. This results in balance of payment deficit and the availability of foreign exchange decreases. Thus , the development in some parts occurs at the expense of other. The surplus produced by labour is transferred to the owner of capital. There is unequal exchange between rich and poor countries.

In a world of increasing economic interconnections the challenges as well as the opportunities are greater . Advanced economies are in a better place. Even though the emerging markets are still dynamic their momentum is slowing. There should be a balance