Global problems

Globalization has many benefits but is also creating significant global problems.

Short run issues:

• recessions caused by financial crash or banking crisis 
• Many global shocks = short term 
• Other short run occurrences might have long run impacts eg. oil shocks 1970s

Long run issues:

• global poverty
• Inequality in economic development
• depletion of non-renewable resources
• environmental damage and global warming

Globalization increases the inter-connectivity and interdependence of nations. This leads to long run benefits in areas such as economic growth and employment. However, globalization also creates challenges as well as risks.

Types of shock:

• Permanent shocks eg. oil shocks - permanently changes markets
• Temporary shocks eg. terrorist attackspolicy induced shocks eg. inflationary shocks due to rapid increases in the money supply
• asymmetric shocks - effect one areas more than others
• symmetric shocks - effect all areas equally
• demand side shocks - sudden changed in aggregate demand eg. due to huge decrease in consumer confidence
• supply side shocks - created to increasing costs
• financial shocks eg. break down of large credit bank

Brexit as an example of a global shock:

• Brexit will probably just have a short term effect.
• it will have benefits, but also negative impacts on the global economy
• the extent to which it will effect the global economy is still unknown and will depend on the negotiations between nations
• the long term effect of Brexit is still unpredictable

  

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