Trade

Trade economy is gradually making its presence felt in different domains across the globe. With globalization being an integral part of the international trade economy, things are gradually developing with better interconnectedness between the markets. Before we delve deep into this particular context, it is important for us to know about trade economics in details. Invest some time to read this informative blog, and enhance your knowledge of the same.

Happy reading!

The Definition of Trade Economics

Before we talk about trades and its economic impact and globalization, it is important for us to know about the trade definition with regards to the economy. A trade-dependent economy is a country where an international trade makes up a large percentage of the economy.

This, as a result, makes the smaller nations more trade-dependent than the bigger ones. What is more important here in this context for us to understand the very concept of Terms of Trade (TOT). It is nothing but the relative price of imports in terms of exports. Terms of Trade is defined as the ratio of the export process to import prices.

 Different Types of Trade 

Now that you are aware of explicit knowledge of how trade links with the economy, let’s know about the different types of trade prevalent across the globe. Each of the trades has different strategic methods associated with putting money in your account.

• Breaks

Stocks in this particular type of trade are nothing but opportunities waiting to happen. It will display abnormal price signals and volumes indicating that the investors have found a concrete reason to sell or buy the stock. However, it is not effective to buy breakouts alone. You need to be sure that the break is an indication that there’s something happening in the company, with little or no significant changes in the fundamentals of the company.

• Reversals

This particular type of trading strategy focuses on the shift in control from the sellers to buyers, and vice versa. There are basically two crucial things one should look for. Firstly, you should look for stocks that are in sustained price trends, and then break the trend line accordingly. However, the second one is apparently more reliable and conservative in nature. The second methodology displays a shift from rising bottoms to falling tops, and vice versa. The success rate of this setup is said to be higher.

• Internal Trade

Also known as the home trade, internal trade is practised within the geographical and political boundaries of a country. It can be on a national level, local level and regional level. It is to be noted that internal trade is sub-divided into two parts. These are as follows:

• Retail Trade: Retail trade refers to the practice of buying in smaller quantities from the wholesalers and selling in small quantities to the end buyers.

• Wholesale Trade: The practice of wholesale trade involves buying in larger lots directly from the manufacturers of the particular good, and selling in large quantities to retailers. The retailers eventually sell those goods or services to the consumers. 

• External Trade

Also known as foreign trade, external trade refers to buying or selling between multiple countries. External trade has further sub-divisions, categorised into three groups. Let’s know about them.

• Entrepot trade: Entrepot trade refers to the practice of goods being imported from one country and being re-exported after some processing.

• Import trade: When a trader from the home country ends up purchasing goods from another trader belonging to a different country, it is called import trade. For example, when a trader from Australia purchases goods from a trader from Singapore, it results in import trade.

• Export trade: When a trader from the home country sells goods or services to trade from another country, it is called export trade. For example, a trader from Singapore sells his/her goods to a trader belonging to Australia, it’s an export trade.

 The Impact of Globalisation on the Economy

Now that you are aware of the various types of trades, lets’ delve further into the more crucial context, which is globalisation. Ever since trade economics has evolved as a phenomenon worth embracing, globalisation has become a part of the realm as well. The impact of globalisation is felt nearly in every aspect of the modern lifestyle. Its influence on world economics is vast.  

What is Globalisation?

Globalisation refers to the process where businesses and other organisations develop and expand international influence by operating on an international scale. As far as its impact on the economy is concerned, there are too many aspects to be talked about.  We shall gradually move on to the next section in order to discuss the same.

The influence of Globalisation on the World Economy

Before I begin with globalisation and its impact on world economy, here’s a graphical representation of the same.

In addition to the extracted graphical information attached above, here’s a theoretically explained detail for you to explore.

According to most of the economists, globalisation is said to provide a net benefit to most of the individual economies across the world. Below mentioned is a list of the major benefits of globalisation you should know about. Take a look.

• Innovation in technology: Globalisation gives rise to a competitive market. And in today’s world of technological advancements, organisations across the globe are gradually embracing new technological trends. This, as a result, is helping new businesses to flourish. For your information, the global economic growth amounted to about 3.74% in the year 2017, which is an increase from 3.27% in 2016.

• Foreign Direct Investment: This is yet another crucial aspect of discussion if we are to talk about the impact of globalisation on the world economy. Foreign direct investment tends to increase at a rapid pace than the overall growth in the entire world trade.

• Expansion of foreign trade: Thanks to globalisation, it has created new avenues for global trade across the world. Previously, there were certain products that were available in a few of the developed countries across the globe. Cut to the chase, in this modern era of foreign trade, even a nation that has an undeveloped economy can expect to import those goods. No wonder, “think local, act global” has become the latest mantra.

Apparently, the relation between globalisation and the world economy is indeed concrete, progressive and beneficial for global trade organisations. However, there are certain notable and alarming challenges associated with the phenomenon as well. Here’re a few of the critical issues listed below. Take a look.

• A threat to sovereignty: Even though this might indicate something controversial, many individuals are of the opinion that multinational firms are threats to national sovereignty. This, as a result, might convince some leaders to promote aggressive nationalism and xenophobia in various instances.

• Makes nations interdependent: Too much of globalisation might make nations interdependent on each other. This, as a result, might lead to global instabilities and regional chaos related to financial fluctuations and the likes.

Now that you are aware of the globalisation definition, its benefits and potential threats that are associated, let’s wait and watch what awaits us in the near future. With increased integration and interdependence of national economies, globalisation, truly is a phenomenon that shall reflect an increased significance of the entire economics worldwide.

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