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Compare the roles of different economic flows in the transfer of capital from core to periphery You have 3 minutes….to draw this and annotate • Now swap with your neighbour and assess for 1) STRENGTHS 2) WEAKNESSES You also need to add in syllabus statements from the global interactions course OUTSOURCING! Key ideas • A range of flows of finance create global networks. • Countries become dependent upon one another for economic success. • Decision makers at national and international scales have influence over flows • From the video • 1) Write down the key terminology • 2) Write down the key ideas (1 sentence each) Basics of economic flows • • • • • • • • • Lenders Borrowers Transactions Credit Asset Liability Market Debt Interest International capital flows • The importing of a good or a service (think outsourcing) • Flows from core to periphery: Core can receive higher rates of return than otherwise • Workers in resource rich peripheral areas can access capital they need to increase productivity and wages Capital • Financial or physical assets which can generate income, such as property or investments. • Capital is one of the factors of production, it is the stock of man-made resources used in the production of goods and services. The other factors of production are land, labour and entrepreneurs. • Money is just a representation of goods or resources try building a boat on a deserted island with just a pocket full of Euros. Geographyalltheway e.g. • Core (UK) Asset rich Home of TNCs Capital rich Periphery(Kenya) Human resource Land resources need for capital When a country’s imports exceed its exports, it has a current account deficit • Since 2002 – net flow to the developed world of $229 billion • $784 billion in 2006 • Hard currency – long term and reliable value of a currency • Soft currency – likely to depreciate or fluctuate against other currencies • Therefore LICs / NICs have felt the need to increase their hard currency reserves. • Therefore their currency reserves will be less likely to lose their value. • E.g. investment in gold instead of soft currency which may be worth very little in a few months time. Types of flows • • • • • • Loans Debt repayment Remittances FDI Aid Repatriation in the transfer of capital Homework The influence of decision makers Task: • Find out the headquarters of the world trade organisation, the international monetary fund and the World Bank. • What do they do?