Balance of payments (BoPs) is systematic statement that systematically summarizes, for a specified period of time, the monetary transactions of an economy with the rest of the world. Put in simple words, the balance of payments of a country is a systematic record of all transactions between the ‘residents’ of a country and the rest of the world. Three main elements of actual process of measuring international economic activity are: Identifying what is/is not an international economic transaction, Understanding how the flow of goods, services, assets, money create debits and credits, and Understanding the bookkeeping procedures for BoP accounting. Each transaction is recorded in accordance with the principles of double-entry book keeping. That is every transaction is recorded based on accounting principle. One of these entries is a credit and the other entry is debit. In principle, the sum of all credit entries is identical to the sum of all Continue reading
International Economics
What is a Circular Economy?
The term circular economy (CE) has both a linguistic and descriptive meaning. Linguistically it is an antonym of a linear economy. A linear economy is one defined as converting natural resources into waste, via production. Such production of waste leads to the deterioration of the environment in two ways: by the removal of natural capital from the environment (through mining/unsustainable harvesting) and by the reduction of the value of natural capital caused by pollution from waste. And the word circular has a second, inferred, descriptive meaning, which relates to the concept of the cycle. There are two cycles of particular importance here: the biogeochemical cycles and the idea of recycling of products. By circular, an economy is envisaged as having no net effect on the environment; rather it restores any damage done in resource acquisition while ensuring little waste is generated throughout the production process and in the life history Continue reading
Economic Systems – Planned Economy, Free Market Economy and Mixed Economy
System of Planned Economy Under the conditions of the planned economy, all decisions concerning what to manufacture, how to manufacture and to whom to manufacture are approved by the sole center or group. This economy is based on collective ownership. Fixed production assets are owned by the government, and resources, production and the quantities of future products are distributed according to a plan. The type of the system of the command economy was prevailing in the USSR, Cuba, and North Korea. The plans of the system of the centralized economy are drawn up and implemented by the authorities and governmental political leaders after consulting with highly ranked professionals: engineers, economists, industrialists, and other experts. These planners decide which products to manufacture and which services to render. Their vote is decisive in approving decisions whether new undertakings are to be constructed, how many employees are to be employed at undertakings, whether Continue reading
Regional Economic Integration
Regional Economic Integration means agreements between groups of countries in a geographic region to reduce and ultimately remove tariff and non-tariff barriers for the free flow of goods, services and factors of production between each other. GATT and WTO are the biggest association of more than 140 member countries, which strive to reduce the barriers. However, more than regional, WTO has a global perspective. By entering into regional agreements, groups of countries aim to reduce trade barriers more rapidly than can be achieved under WTO. While there have been decreases in the global barriers to trade and investment, the greatest progress had been made on a regional basis. There are many examples in the current popular push on the European Union (EU) and the effects the EU have on a particular business or industry that illustrates this point. Perhaps the best example of the benefits of economic integration and political Continue reading
Global Company Competitiveness Analysis
A domestic company may extend its products to foreign markets by exporting, licensing and franchising. Initially, the exporting is indirect. It may develop a more serious attitude towards foreign business and move to the next stage of development. International company is normally the second stage in the development of a company towards transnational corporation. The orientation of the company is basically ethnocentric and the marketing strategy is extension. The marketing mix developed for the home market is extended into the foreign markets when a company decides to respond to market differences, it involves into the stage there multinational that pursues a multidomestic strategy. Multinational company’s each foreign subsidiary is managed as if it were an independent city stage. The subsidiaries are part of an area structure in which each country is part of a regional organization that reports to world headquarters. The transnational corporation is much more than a company Continue reading
Role of Supply Side Policies in Balanced Economic Growth
The government has a responsibility for delivering public goods optimally for the collective development of all individuals. In the quest to achieve this noble course, supply side policies, which form part of macroeconomic strategies, are developed to ensure that markets and industries function in an efficient way to increase the rate of economic growth as reflected in the real national yield. Many governments support the assertion that they can achieve a sustained economic growth by improving supply side operations without causing an increase in inflation. However, reforms on the supply side policies do not facilitate the achievement of adequate growth. Definition and Explanation of Balanced Economic Growth Although the growth rate does not reflect people’s living standards entirely, economic growth has been one of the critical areas of consideration for every nation that is in the process of developing its economic policies. Indeed, economic growth is the most common approach Continue reading