World Economy

We live in a very integrated world, where physical boundaries are overcome by trade and technology. Globalization has made a global trade and a singular global market a reality. Which is why we study international economics, the study of economic relations between countries. Let us get started!

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World Economy

International economics is a study of the economic relations between all the countries of the world. Since we live in such a small world, the economic conditions and policy of one nation tend to affect many countries. Take for example the current case of Brexit.

International economics can be very broadly divided into two – International Trade and International Finance. So considering that almost all countries o the world these days participate in international economic relations, these trade and finance agreements between them can get complicated. And this is where international organizations and trade unions come in. Let us study a few of them in detail.

World Bank

The World Bank is an international financial institute, with 189 member countries. It was established in 1944, and since then has successfully provided financial and technical aid to dozens of countries on thousands of occasions.

The main aim of the world bank is to fight poverty, by ensuring the underdeveloped and developing countries have access to loans and finances to carry out such programs. The world bank provides these countries not only with financial aid but with technical help as well. The world bank wishes to achieve two main goals by 2030. The first is to bring extreme poverty within 3% of the global population. And the second is to boost the prosperity of the lower 40% of the population (based on income) to battle with income disparity.

International Monetary Funds (IMF)

Along with the World Bank, the IMF is the other important financial institution of the world. It also has 189 member countries. The main aim of the IMF is to ensure financial stability in the global economy and promote stable economic growth. It also assists in better trade and economic relations between member countries.

The IMF actually collects data and reviews the economic policies of all the member countries. It then analyses data and even reports and reviews economic policies. Like for example, before the global market crash of 2008, the IMF had warned of such a crisis. Since then the IMF has increased their surveillance levels.

One of the secondary functions of the IMF is to provide technical and financial assistance to its members in their hour of need. It even provides short-term loans and other such financial help.

North American Free Trade Agreement

This is the North American Free Trade Agreement. It was established in 1994, and the members are the three main economies of North America, i.e. The United States of America, Canada, and Mexico. The main aim of NAFTA was to eliminate any trade barriers between the three countries. This included eliminating tariffs and duties on trade between them as well. The agreement wished to boost trade between the countries and stimulate their economies. Equal access to each other’s market will improve the economic stability in all its member countries as well.

World Trade Organisation

The WTO is the world’s biggest economic institution for overseeing the rules and trade policies between all of its member countries. It helps the global community in framing an outline for trade policies between countries.

Some other functions of the WTO are,

• It can review and analyze trade agreements and policies of various countries, and can even comment on their legality and fairness.
• It is also a platform to settle disputes between member countries. If there are any conflicts regarding the trade policies or agreements, the WTO has the tools to help negotiate a comprise
• Also, it is a platform to negotiate trade agreements and contracts between member countries
• WTO helps reduce barriers in the international market to promote global trade and ease of trading
• And it conducts research and analysis of its own and publishes reports

United Nations Conference on Trade and Development

UNCTAD is a principal organ of the General Assembly of the United Nations. It was formed in 1964 mainly to help the developing economies of the world, which were being ignored by the WTO. It aimed to give these countries the opportunity to trade on an equal basis as the developed economies.

The UNCTAD helps in all fields of potential development, namely trade, finance, technology, infrastructure etc. It works towards eliminating the trade barriers some of these economies face in the world market. It assists these countries in formulating favourable economic policies and even helps with the implementation of such policies.

The UNCTAD is actually a partner of the WTO. Both even signed a MoU to carry out joint missions to help the under-developed and developing countries with their economic troubles.

Solved Questions for You

Q: Which of the following did the BRICS nations establish in the year 2014?

1. NABARD Bank
2. BRICS Committee on Banks
3. New Development Bank
4. None of the above

Ans: The answer is C. In July 2014 at the sixth BRICS summit, was established by the BRICS nations, i.e. Brazil, Russia, India, China and South America. They will also coordinate with other financial institutes to provide financial and technical assistance.

Q: Special Drawings Rights is a unique feature of which of the following?

1. IMF
2. WTO
3. NASBA
4. United Nations

Ans: The answer is A. Special Drawing Rights was a unique artificial currency that the IMF created. It is actually an alternative way to settle accounts, other than dollars and money. It helps with liquidity and is much faster as well. They are used for internal accounting purposes.

Q: Britain is currently in the process of leaving which of the following organization?

1. UNCTAD
2. WTO
3. INTERPOL
4. EU

Ans: The answer is D. Britain following the Brexit movement voted in a referendum to leave the European Union (EU). The EU is an international organization consisting of 28 European countries as its members. It is not only an economic organization but also a social organization. It works on the principles of a single currency and common citizenship rights.

Practice Questions

Q: The back office of the World Bank operates from which city?

1. Amsterdam
2. Boston
3. Chennai
4. Denver

Ans: C

Q: The WTO was established in which year?

1. 1949
2. 1946
3. 1995
4. 1996

Ans: C