2.4 Life in a Global Economy Flashcards
What’s globalisation
the process through which an increasingly free flow of ideas, people, products and capital loads to integration of economies and societies
What’s FDI
Foreign Direct Investment - Businesses and governments investing in other countries
What 3 things does globalisation bring
Increased FDI
World trade increased (higher global GDP)
Increased migration
Name 2 things people see bad about globalisation and 2 things they see good
Bad - Dominance of Western economies, exploitation of emerging economies (low-paid sweatshops)
Good - Wealth and development across the globe, interdependence binds countries and encourages peace.
How can increased exportation raise incomes
Exports generate higher GDP
Investments into new projects
Jobs are created
Incomes rise
How do the IMF, world bank and WTO help regulate world trade and increased globalisation
International monetary fund - helps to police the trade that happens in the world. The world bank lends to countries which are struggling financially. World trade organisation help remove trade barriers.
Give an example of where interdependence has been a bad thing
The financial crisis of 2008 caused reverberations across the globe, it didn’t just affect those in the USA where it happened
How has improved communication made trade easier
If countries can communicate effectively and cheaply, this drives trade and improves transportation methods. This is a main contributor to the increased globalisation
What’s an MNC
Multi-national corporation
Active in more than one country.
Why do MNCs occur
In most domestic markets, the level of saturation is high. There’s nobody left to sell to. Therefore, the business will expand abroad and tap into new markets. This is more common now as a result of globalisation
What’s outsourcing and what are the main benefits of it
Paying someone else (might be abroad, might not) to do the work for you. May be able to find low cost labour and locate production near raw materials, or find countries with lower tax rates
What is BRICs
Brazil, Russia, India, China and South Africa all have emerging economies and are a part of the g-20
Why has globalisation increased the success of the BRICs economies
More demand worldwide and increased trade has opened up more trade opportunities and sales. Resulting in higher output and GDPs
What are the main 2 indicators of growth
GDP per capita
Gross domestic product / population
Doesn’t show inequality (only an average of everyone)
HDI - human development index
Income - PPP (indicates cost of living and respective wealth)
Life expectancy
Years at school - education
What other 3 measures could be used to measure the level of development
Literacy rates
Health indicators (water, infant mortality)
Mobile phone use
Name 2 characteristics of developed, developing and emerging economies
Developed - high income, advanced tech and infrastructure.
Developing - Early stages of industrialisation, low HDI/GDP
Emerging - In transition between developing and developed, growing PPP/GDP
Why is median a better indicator of growth than mean
It doesn’t include the outliers and inequalities of an economy.
What is specialisation
Economies make the most of their skills/resources by concentrating on the goods/services they already have an advantage in (land, climate, raw materials). Skilled workers produce more, higher output = higher GDP. Trade is essential for this to work.
Advantages and disadvantages of specialisation
A - Increased output and efficiency, economies of scale, cheaper costs, competitive advantage.
D - Over-reliance on one economy (if India makes all cars for example, if they shut down or can’t export, we have no cars), all eggs are put into one basket, the value of the good may influence your GDP, if demand falls - structural unemployment/waste of resources/skill.
What 2 ways can a trading bloc run in regard to trade
- Free trade between those countries (NAFTA)
- Common market - free market within but set tariffs with countries outside the bloc (EU)
What are visible and invisible exports/imports
Visible is a good
Invisible is a service
What’s the difference between the balance of trade and the balance of trade for services
The BOT is the difference between the visible exports and visible imports
the BOTFS is the difference between the invisible exports and invisible imports
Why are cheap imports good and then, why are they bad
Good - higher standards of living, more choice, cheaper raw materials for businesses, keeps inflation low
Bad - harms domestic industries, unemployment may rise
However, creative destruction may occur because as jobs are lost from structural change, new ones are created from the increase in GDP
How is the exchange rate determined by demand and supply
Demand for the pound (those who buy our exports and FDI), supply for the pound comes from those in the UK who import and those who want to buy foreign currency. If demand goes down, less will be supplied.
