International Relations Theory and Global Economy Essay

International Relations Theory and Global Economy - Essay Example International Relations Theory and Global Economy Global economy is the combination of all the economies of the world’s countries. The valuation of the world economy can be arrived at by representing it in a certain currency like the US dollars. Each country experiences a trade cycle where the rate of growth of expenditure, incomes and production changes over a period of time. The duration and effects of these cycles are dynamic simply because the structure of the economy is developing. This may be caused by theoretical relationships between different variables, for example, unemployment and inflation which might have changed. This poses many challenges to policy makers as they try to control the economy and meet their objectives. Taking the economic growth of a country, for example the U.K., and analyzing how it has been for the past years, it is possible to know that the country has experienced many shortcomings to date. Notably, the UK has experienced recession and boom periods in the process of its economic development. J ust to highlight some key areas contributing to the growth of the U.K economy, one is strong consumption. Consumer spending has contributed positively and has had positive effects to the economy like, absorbing some of the weaknesses of the export and investment sectors. However, this has not come so easily because it has its limitations, which include increased debts and increase in rentals. Low investment in capital equipment has also led to growth in the economy as some of these major investments were left to the private sector to cover.3. Growth of the economy globally has main stages like the economic boom. A boom is a situation that occurs when gross domestic product grows faster than the trend growth rate. At this period, aggregate demand is high, and businesses increase production and employment. Due to high demand, prices may also increase which translates to cost push and inflation in demand. Demand for imports increases because of high marginal propensity of importation a mong customers. Revenues from tax increase as more people are in employment and earning, hence, they spend more money. In addition, company realizes high profits as production increases, thus, increasing sales due to high demand in turn leading to high investment. Labor is used exhaustively at minimal costs, that is, no extra labor is needed. The other economic cycle is the economic recession which is a decrease in national output4. Every aspect of the economy is restrained to its maximum. This is a period where the economy is operating below its breakeven point. As the negative part of the economy, it can lead to increased unemployment, low income per head, international insecurity as many become jobless increased bad debts and the end result of all this is conflicts. The table below gives an illustration of the economic growth of the UK and inflation rate in the country for the past few years; Resource: http://www.economicshelp.org/images/macro-graphs/econ-growth-inflation-dec-201 1png.jpg Further still, global economy has attracted the centre stage in international politics of late. Politicians cannot do without bringing the issue of economic growth and fall to the world as they try to appeal to the world to consider them in election to top seats. They lay down structured policies on how they are going to deal with the monster