Cost-push v Demand-pull inflation Communication System and Trade Barriers Q6

Demand-pull inflation is more of increase in aggregate demand or having more money in the market. It is No.1 - increase in the money supply or No.4 - increase in aggregate demand. This can happen in scenario that increase in the foreign purchases make the goods sold to outsiders, and less are available for locals. It can also happen that the government pumps in lots of projects and contracts, and people are paid with more salary or money, resulting in more money going after the same amount of goods and services. Thus, in competing for the same goods and services, people pay more in price.

Ref:
Cost-Push Inflation Versus Demand-Pull Inflation http://www.investopedia.com/articles/05/012005.asp#ixzz4rC9S9H7V

b) Factors promoting globalization of the national economy

i) The development of Communication System

Communication system means generally as telecommunication, Internet and all forms of transmission of messages from sender to receiver. Of this, the sender and receiver are not physically together. Communication system can also mean transport communication, which means the availability of rail, road, sea and air transportation to link two locations together.

Overall, communication systems and technologies foster the relationship for trade and industries. The coordination and cooperation of two or more parties from different locations, be it seller and buyer, between manufacturers or knowledge sharing where there is no physical exchange of goods, will increase working activities between different countries. Insodoing, it will definitely foster international trading. This phenomenon will thus fuel globalization.

Globalization means

"the process by which businesses or other organizations develop international influence or start operating on an international scale."

When a country has resources, it trades with other countries which require that resource. Communication system fosters that relationship. The economy of the country - its national economy, will hence be linked to the global economics superhighway.

Advances in the means of transport (such as the steam locomotive, steamship, jet engine, and container ships) and in telecommunications infrastructure (including the rise of the telegraph and its modern offspring, the Internet and mobile phones) have been major factors in globalization, generating further interdependence of economic and cultural activities.[2][3][4]

Though many scholars place the origins of globalization in modern times, others trace its history long before the European Age of Discovery and voyages to the New World, some even to the third millennium BC.[5][6]

Large-scale globalization began in the 1820s.[7] In the late 19th century and early 20th century, the connectivity of the world's economies and cultures grew very quickly. The term globalization is recent, only establishing its current meaning in the 1970s.[8]

Ref:
https://en.wikipedia.org/wiki/Globalization

ii) Reduction of trade barriers

Trade barriers are like restriction to import or export of certain goods and services. Government impose trade barriers mainly to protect their own industries and employment. A country with trade barrier will not allow certain industries to be set up in its homeland. As such, the economy of that country will not be affected by this foreign party, or as in most cases, a foreign competitor.

Take for example, the automobile industry. Trade barrier would be like high import duty on foreign cars into the country. This is to protect the home grown car industries, which employ hundreds of thousands of workers. The foreign made cars would have trade barrier to enter this country. And, the national economy of car industry in this country will not be affected (as it has no competition) by foreign imported cars.

Reducing trade barrier, in such example would be allowing the foreign car manufacturers to sell and even set up car manufacturing in the country. This might compete with the existing local brands, but in the long term, allows technological transfer and exporting the cars to other countries around the region.

This effect will increase the national economy of the country. Which means, the country can export its own cars, and the foreign local assembled cars to regions previously not their market segment. On a whole, the national economy of this country grows as more business are generated with the help of the more established industries.

Reduction of trade barriers is like an exchange of terms between countries. Country A allows goods of Country B to be sold in its homeland, the Country B in return allows other goods of Country A to be sold in its homeland. As a result, it foster globalization and increase in aggregate national economy of both countries.

Ref:
Own account.