2025 Economics Notes
Yr 12
All Topics
Contents
1. The Global Economy 2
1.1 International Economic Integration 2
1.2 Trade, Financial Flows and Foreign Investment 5
1.3 Protection 11
1.4 Globalisation and Economic Development 16
1.5 China Case Study 23
2. Australia’s Place in the Global Economy 27
2.1 Value, Composition and Direction of Australia’s Trade and Financial Flows 27
2.2 Australia’s Balance of Payments 30
2.3 Exchange Rates 38
2.4 Free Trade and Protection 43
3. Economic Issues 48
3.1 Economic Growth 48
3.2 Unemployment 54
3.3 Inflation 60
3.4 External Stability 64
3.5 Distribution of Income and Wealth 67
3.6 Environmental Sustainability 73
4. Economic Policies And Management 78
4.1 Macroeconomic Policies 78
4.2 Microeconomic Policies 87
4.3 Labour Market Policies 90
4.4 National and Global Context for Environmental Management 93
4.5 Limitations of Economic Policies 96
, 1.The Global Economy
The 6 Economic Issues:
- Economic Growth
- Unemployment
- Inflation
- External Stability
- Distribution of Income and Wealth
- Environmental Sustainability
1.1 International Economic Integration
The Global Economy
The global economy describes the activities of all the world's economies as a whole, reflecting that
they are now increasingly linked together into an overall economic unit.
As such, it refers to the integration of the world:
● Integration refers to the liberalisation of trade between two or more countries. The countries
aim to ensure the free trade agreement is being implemented when tariffs are lifted from
countries.
○ Monetary Union.
○ A customs union.
○ A free trade area.
○ A common market.
Gross World Product (GWP)
Global output is the measure of all the G&S produced by all the economies in the world.
Alternatively, it is the sum of the total output of goods and services produced by all economies in
the world over a given period of time.
- GWP is measured against US dollars as it is the world’s reserve currency (and is the
strongest).
Globalisation - Indicators of Globalisation
Globalisation refers to the increased integration and interdependence between nations, states and
their economies and the increased impacts of international influences on all aspects of life and
economic activity. It is evident through the indicators of:
● Trade: globalisation has led to a growth in the exchange of goods and services in an
economy.
- Trade has grown rapidly. Gross World Product (GWP) has grown nine-fold since 1950 while
world trade has grown 33-fold from its level in 1950.
, - The norm for global trade has grown more quickly than GWP → indicator of
globalisation.
● Financial Flows: globalisation has led to an increase in the flow of money between
economies. Most globalised feature as money moves more quickly than goods or services.
- Growth in global financial flows is evidenced by growth in foreign currency markets, financial
securities trade, and capital flows.
- In 2016, the global derivative was $532 trillion USD, six times the GWP.
- Flows of funds have expanded substantially due to:
1. Deregulation of the finance market (floating exchange rate – 1983)
2. Technological change.
● Investment Flows and Transnational Corporations (TNCs):
- Both FDI (>10%) and portfolio (<10%) for the purpose of establishing a new company or
buying a controlling share.
○ Global FDI peaked in 2015 at about $2 trillion USD.
- Transnational Corporations (TNCs) are enterprises that are involved in the international
production of goods and services. They heavily contribute to FDI because they establish
subsidiaries within other economies to boost production, also becoming a source of funds.
● Technology, Transport and Communication:
- Technology facilitates the integration of economies.
- It is the ultimate driver of globalisation.
- It impacts the productivity of goods which impacts supply.
- It allowed for more efficient transportation of goods and services.
- Social media accentuates globalisation. E.g., Google earned $66 billion USD from ad revenue
in 2014.
● International Division of Labour and Migration:
- The international division of labour describes the distribution of world tasks across the
world.
- E.g., Migration is a division of labour: 255 million immigrants worldwide in 2016.
- Highly skilled people are attracted to rich economies with greater rewards and opportunities.
- Low skill is also in demand in advanced economies where it is difficult to attract people to do
certain things.
- The 1980s saw strong growth in the international division of labour due to offshoring
from advanced economies and greater specialisation by economies.
, Advantages Disadvantages
1. Access to a large labour force 1. Loss of jobs – structural
2. More competitive in cost unemployment
3. Employment opportunities 2. Exploitation of workers
4. Increased wages 3. Undermining the industrial relations
5. Potentials for improved wages and framework
working conditions 4. Domestic firms significantly reduce wages to
be competitive
The International and Regional Business Cycles
There are four phases of the business cycle:
- Downturn: a significant decline in economic activity spread across the economy, lasting
more than a few months.
- Recession: a sustained period of weak or negative growth in real GDP (output) that is
accompanied by a significant rise in the unemployment rate. It is a prolonged downturn
lasting for two consecutive quarters of negative growth in real GDP.
- Recovery: An upturn in demand for resources/labour/new investment/plant & equipment
following a recession. During a recovery, real national output moves closer to the previous
peak.
- Boom: A boom is a period of strong economic expansion where many businesses are
operating at full capacity or above capacity, and the unemployment rate is very low.
The regional business cycle is all the economies within a geographical area with similar degrees of
economic activity. Eg Euro Area, USMCA.
The international business cycle is the integration of economies where changes in domestic
economies impact other economies. It is the fluctuations in the level of economic activity in the
global economy over time.
- Synchronisation can also mean the possibility of greater exposure to a global recession.
Business Cycle Synchronicity
Business cycle synchronicity might occur because countries experience shocks common to all
countries (e.g. oil price shocks which decrease/increase the price of oil for all economies) or shocks
common to countries in the same region (e.g. weather).
- The degree to which business cycles synchronise across countries might depend on physical
distance, the amount of bilateral trade, similarities in institutions or language, or historical
trade routes.
- ‘Iceberg’ costs referring to physical distance are less prominent in determining synchronicity.
A way to imagine business cycle synchronisation would be to imagine each country’s business cycle
having a global, regional, and country component.
Yr 12
All Topics
Contents
1. The Global Economy 2
1.1 International Economic Integration 2
1.2 Trade, Financial Flows and Foreign Investment 5
1.3 Protection 11
1.4 Globalisation and Economic Development 16
1.5 China Case Study 23
2. Australia’s Place in the Global Economy 27
2.1 Value, Composition and Direction of Australia’s Trade and Financial Flows 27
2.2 Australia’s Balance of Payments 30
2.3 Exchange Rates 38
2.4 Free Trade and Protection 43
3. Economic Issues 48
3.1 Economic Growth 48
3.2 Unemployment 54
3.3 Inflation 60
3.4 External Stability 64
3.5 Distribution of Income and Wealth 67
3.6 Environmental Sustainability 73
4. Economic Policies And Management 78
4.1 Macroeconomic Policies 78
4.2 Microeconomic Policies 87
4.3 Labour Market Policies 90
4.4 National and Global Context for Environmental Management 93
4.5 Limitations of Economic Policies 96
, 1.The Global Economy
The 6 Economic Issues:
- Economic Growth
- Unemployment
- Inflation
- External Stability
- Distribution of Income and Wealth
- Environmental Sustainability
1.1 International Economic Integration
The Global Economy
The global economy describes the activities of all the world's economies as a whole, reflecting that
they are now increasingly linked together into an overall economic unit.
As such, it refers to the integration of the world:
● Integration refers to the liberalisation of trade between two or more countries. The countries
aim to ensure the free trade agreement is being implemented when tariffs are lifted from
countries.
○ Monetary Union.
○ A customs union.
○ A free trade area.
○ A common market.
Gross World Product (GWP)
Global output is the measure of all the G&S produced by all the economies in the world.
Alternatively, it is the sum of the total output of goods and services produced by all economies in
the world over a given period of time.
- GWP is measured against US dollars as it is the world’s reserve currency (and is the
strongest).
Globalisation - Indicators of Globalisation
Globalisation refers to the increased integration and interdependence between nations, states and
their economies and the increased impacts of international influences on all aspects of life and
economic activity. It is evident through the indicators of:
● Trade: globalisation has led to a growth in the exchange of goods and services in an
economy.
- Trade has grown rapidly. Gross World Product (GWP) has grown nine-fold since 1950 while
world trade has grown 33-fold from its level in 1950.
, - The norm for global trade has grown more quickly than GWP → indicator of
globalisation.
● Financial Flows: globalisation has led to an increase in the flow of money between
economies. Most globalised feature as money moves more quickly than goods or services.
- Growth in global financial flows is evidenced by growth in foreign currency markets, financial
securities trade, and capital flows.
- In 2016, the global derivative was $532 trillion USD, six times the GWP.
- Flows of funds have expanded substantially due to:
1. Deregulation of the finance market (floating exchange rate – 1983)
2. Technological change.
● Investment Flows and Transnational Corporations (TNCs):
- Both FDI (>10%) and portfolio (<10%) for the purpose of establishing a new company or
buying a controlling share.
○ Global FDI peaked in 2015 at about $2 trillion USD.
- Transnational Corporations (TNCs) are enterprises that are involved in the international
production of goods and services. They heavily contribute to FDI because they establish
subsidiaries within other economies to boost production, also becoming a source of funds.
● Technology, Transport and Communication:
- Technology facilitates the integration of economies.
- It is the ultimate driver of globalisation.
- It impacts the productivity of goods which impacts supply.
- It allowed for more efficient transportation of goods and services.
- Social media accentuates globalisation. E.g., Google earned $66 billion USD from ad revenue
in 2014.
● International Division of Labour and Migration:
- The international division of labour describes the distribution of world tasks across the
world.
- E.g., Migration is a division of labour: 255 million immigrants worldwide in 2016.
- Highly skilled people are attracted to rich economies with greater rewards and opportunities.
- Low skill is also in demand in advanced economies where it is difficult to attract people to do
certain things.
- The 1980s saw strong growth in the international division of labour due to offshoring
from advanced economies and greater specialisation by economies.
, Advantages Disadvantages
1. Access to a large labour force 1. Loss of jobs – structural
2. More competitive in cost unemployment
3. Employment opportunities 2. Exploitation of workers
4. Increased wages 3. Undermining the industrial relations
5. Potentials for improved wages and framework
working conditions 4. Domestic firms significantly reduce wages to
be competitive
The International and Regional Business Cycles
There are four phases of the business cycle:
- Downturn: a significant decline in economic activity spread across the economy, lasting
more than a few months.
- Recession: a sustained period of weak or negative growth in real GDP (output) that is
accompanied by a significant rise in the unemployment rate. It is a prolonged downturn
lasting for two consecutive quarters of negative growth in real GDP.
- Recovery: An upturn in demand for resources/labour/new investment/plant & equipment
following a recession. During a recovery, real national output moves closer to the previous
peak.
- Boom: A boom is a period of strong economic expansion where many businesses are
operating at full capacity or above capacity, and the unemployment rate is very low.
The regional business cycle is all the economies within a geographical area with similar degrees of
economic activity. Eg Euro Area, USMCA.
The international business cycle is the integration of economies where changes in domestic
economies impact other economies. It is the fluctuations in the level of economic activity in the
global economy over time.
- Synchronisation can also mean the possibility of greater exposure to a global recession.
Business Cycle Synchronicity
Business cycle synchronicity might occur because countries experience shocks common to all
countries (e.g. oil price shocks which decrease/increase the price of oil for all economies) or shocks
common to countries in the same region (e.g. weather).
- The degree to which business cycles synchronise across countries might depend on physical
distance, the amount of bilateral trade, similarities in institutions or language, or historical
trade routes.
- ‘Iceberg’ costs referring to physical distance are less prominent in determining synchronicity.
A way to imagine business cycle synchronisation would be to imagine each country’s business cycle
having a global, regional, and country component.
