2.2 The Global Economy Unit 35 - 39

Question 1

1. What is globalization?

Answer 1

it is the growing interconnection of the world’s economies.

Question 2

2. What is interdependence?

Answer 2

• where the actions of one country or large firm will have a direct effect on others.

Question 3

3. What are the 5 features of globalization?

Answer 3

• goods and services are traded freely across international borders.
• free to live and work in any country they choose.
• high level of interdependence between nations.
• capital can flow between different countries.
• the free exchange of technology and intellectual property.

Question 4

4. What are the four reasons for globalization?

Answer 4

• fewer tariffs and quotas
• reduced cost of transport
• reduced cost of communication
• increased significance of multinationals

Question 5

6. What is a saturated market?

Answer 5

market in which there is more of a product for sale than people want to buy.

Question 6

7. Who are the 6 things affected by globalisation?

Answer 6

• individual countries
• governments
• producers
• consumers
• workers
• the environment

Question 7

8. What are the 6 advantages to individual countries of globalization?

Answer 7

• high GDP
• growth
• contribute and increase wealth in the country
• more output
• high employment

Question 8

9. What is the disadvantages to an individual country of globalization?

Answer 8

• due to interdependence economy can be affected badly.

Question 9

10. What are the 4 advantages to a producer of globalization?

Answer 9

• access to huge markets.
• lower costs.
• access to labor.
• reduced taxation.

Question 10

11. What are the 5 advantages of consumers of globalization?

Answer 10

• cheaper goods
• wider choice
• latest technology
• quality of goods
• improved living standards.

Question 11

12. What are the 3 advantages to workers of globalization?
    1 disadvantage to workers?

Answer 11

Ad:- more job opportunities
- learn new skills
- can get paid more
Dis: offshoring:- practice of getting work done in another country in order to save money.

Question 12

13. What is a disadvantage of globalization to the environment?

Answer 12

unsustainable economic growth:- economic that is not possible to sustain without causing environmental problems.

Question 13

14. What is the 2 advantage of globalization to the government?

Answer 13

• increase in tax revenue
• encouragement of starting up new business.

Question 14

15. What are multinational corporations?

Answer 14

• companies that operate in many different countries.

Question 15

16. What are the 6 features of MNCs?

Answer 15

• Huge assets
• highly qualified and experienced professional executives and managers.
• powerful advertising and marketing capability.
• highly advanced and up-to-date technology.
• highly influential both economically and politically.
• very efficient since they can exploit huge economies of scale.

Question 16

17. What is Foreign Direct Investment? (FDI)

Answer 16

FDI, or inward investment, occurs when a company makes an investment in a foreign country.

Question 17

18. What are the 4 reasons for the emergence of MNCs/ FDI?

Answer 17

• economies of scale
• access to natural resources/ cheap materials.
• Lower transport and communication costs.
• Access to customers in different regions.

Question 18

19. What are the four ways governments actively seek FDI?

Answer 18

• offering tax breaks, subsidies, grants, and low-interest loans
• lifting restrictions and relaxing regulations to make investing easier for foreign firms
• investing in their own infrastructure.
• investing in education so that people can get jobs in foreign countries.

Question 19

20, What are the 5 advantages to governments of MNCs and FDI?

Answer 19

• Job creation
• investment in infrastructure.
• developing skills.
• developing capital
• ## contributing to taxess

Question 20

21. What is tax avoidance?

Answer 20

• practice of trying to pay less tax in legal ways.

Question 21

22. What is repatriation?

Answer 21

• where a multinational returns the profits from an overseas venture to the country where it is based, typically from a developing country to a developed country

Question 22

23. What are reserves?

Answer 22

• are the amount of something valuable, such as oil, gas…

Question 23

24. What are the 3 disadvantages of governments of MNCs/ FDIs?

Answer 23

• Tax avoidance
• environmental damage
• moving profits abroad.

Question 24

25. What is international trade?

Answer 24

international trade is trade between nations.

Question 25

26. What are the 3 reasons for international trade?

Answer 25

• obtaining goods that cannot be produced domestically.
• obtaining goods that can be bought more cheaply from overseas.
• selling off unwanted commodities.

Question 26

27. What is free trade?

Answer 26

• situation in which the goods coming into or going out of a country are not controlled or taxed.

Question 27

28. What are the 3 advantages of free trade?

Answer 27

• lower prices and increased choice for consumers.
• lower input prices.
• wide markets for businesses.

Question 28

29. What are 2 disadvantages of free trade?

Answer 28

• competition for domestic businesses.
• unemployment in domestic firms.

Question 29

30. What is protectionism?

Answer 29

• approach used by governments to protect domestic producers

Question 30

31. What is dumping?

Answer 30

• where an overseas firm sells large quantities of a product below cost in the domestic market.

Question 31

32. What are trade barriers?

Answer 31

• measures designed to restrict imports.

Question 32

33. What are the 7 reasons for protectionism?

Answer 32

• prevent dumping
• protecting employment
• protecting infant industries
• to gain tariff revenue
• preventing the entry of harmful or unwanted goods.
• reduce current deficits.
• retaliation

Question 33

34. What are infant industries?

Answer 33

new industries yet to establish themselves.

Question 34

35. What are the 3 methods of protectionism?

Answer 34

• tariffs
• quotas
• subsidies

Question 35

36. What are tariffs/ custom duties?

Answer 35

• a tax on imports to make them more expensive.

Question 36

37. What is embargo?

Answer 36

official order to stop trade with another country(it is an extreme form of a quota)

Question 37

38. What is quota?

Answer 37

• physical limit on the quantity of imports allowed into a country.

Question 38

39. What is bi-lateral trade agreement?

Answer 38

trade deal between only 2 countries.

Question 39

40. What impact do tariffs and quotas have on a. Import quantity? b. Price of imports. c. demand on imports?

Answer 39

-a. reduces import quantity
-b. increase the price of imports
-c. reduction in demand for imports.

Question 40

41. What impact do subsidies have on producers?

Answer 40

it helps them to produce more, or they are forced to reduce prices.

Question 41

42. What is a trading bloc?

Answer 41

• groups of countries situated in the same region that join together and enjoy trade free of trade barriers.

Question 42

43. What are the 5 types of trading bloc?
    define

Answer 42

• Preferential Trading Areas(PTAS) :- this type of arrangement means that members agree to remove trade barriers on a range of goods and services.
• Free Trade Areas:- trade between members of an FTA is completely free of trade barriers.
• Custom unions:- A customs union is a type of trade bloc that is composed of a free trade area with a common external trade barrier.
• Common markets:- a group of countries imposing few or no duties on trade with one another and a common tariff on trade with other countries, also allowing free movement of labor and capital.
• Economic unions:- An economic union is a free movement of goods, services, money, and workers between nations, facilitated by coordinating social and financial policies.

Question 43

44. What are the advantages of trading blocs on member states?(6)

Answer 43

– goods will be cheaper
-consumer choice
- faster economic growth
- exploit economies of scale
- extra competition improves the quality of goods and encourages innovation.
- reduces border conflict.

Question 44

45. What are the 5 disadvantages of trading blocs on member states?

Answer 44

• financial cost to the government.
• exploit consumers in the bloc.
• rely too heavily on trade within the bloc.
• also miss out on opportunities in other world markets
• inefficient producers may be protected from businesses outside the trade bloc then consumers might end up paying more for goods and services.
• unequal resources leading to political tension.

Question 45

46. What is a disadvantage of trading bloc on a non-member states?

Answer 45

• will face common trade barriers and may be forced to find new markets.

Question 46

47. What are the 3 examples of trading blocs?

Answer 46

• NAFTA(north American Free Trade Agreement) :- the USA, Canada and Mexico.
• ASEAN(association of southeast Asian nations) :- Thailand, Vietnam, Malaysia, Indonesia, the Philippines, and Singapore.
• SACU( South African Customs Unions):-(bostswana, Lesotho, nambia