3.1 Globalisation Flashcards
Define globalisation
The increased interconnectivity of nations on a global level, both economically and politically
How many people has the growth of China lifted out of poverty?
800 million
How can globalisation be negative for a firm?
Increased competition
Define real value
A measure of the value of money with the effect of inflation removed
Define nominal value
A measure of the value of money including inflation
What’s the formula for Real Value?
Nominal Value
———————– (x100%)
Price Index
Why is it important to use real values when analysing market data from different countries?
Different countries have different taxes
What’s the formula for index number?
Current value
————————— (x100%)
Base Year Value
Give 4 advantages of the emergence of the BRIC economies on UK business
- Outsourcing
- New markets
- Cheaper raw materials
- Tourism industry will increase
Define specialisation
When a business, country or region focus on the production of a limited range of goods and services
Give 3 advantages to a business of specialisation
- Boost productivity and sales
- Increase the quality of good/service
- Induces investment
Give 2 potential disadvantages of specialisation to a business
- Risk isn’t spread
- Footloose multinationals could move to cheaper countries
Define trade liberalisation
The process of reducing trade barriers to induce free trade
Define trade barrier
An umbrella term for things that make trade more difficult
Define tariff
A tax on imports
Define quota
A limit on import
Define subsidy
A government payment to reduce business costs and boost output
Give the 6 reasons as to why trade liberalisation has increased
- WTO
- Rise of MNCs
- Political change
- Technology advancements
- Specialisation
- Globalisation
Give 3 benefits to the world economy of trade liberalisation
- Countries can benefit from their comparative advantage
- Reduces overproduction
- Allows firms to operate at their most productive
Give 2 ways in which trade liberalisation can hinder the individual economy of countries
- Increased competition can bankrupt countries
- Prevents governments protecting infant industry with protectionist policies
Define FDI
Capital investment from one economy to another
Between what type of countries is FDI highest?
Developed countries
Define trade bloc
A group of countries who have an agreement for free trade
Which type of trade bloc offers no trade barriers between member countries alongside separate policies for trade with external nations?
Free Trade Area
Which type of trade bloc offers no trade barriers between member nations but a single policy that covers external nations?
Customs Union
Which type of trade bloc offers no trade barriers between member nations with a single policy that covers external nations and the free movement of people?
Common Market
What type of trade bloc offers the removal of all barriers to the movement of goods, labour and capital?
Single market
What is ASEAN?
A free trade area between: Indonesia Malaysia Philippines Singapore Thailand
What is NAFTA?
A free trade area between:
Canada
USA
Mexico
Give 5 advantages of a country being in a trading bloc
- Exports increase, boosting AD
- Cheaper imports
- Risk is spread
- Attracts FDI
- Competition makes their businesses more efficient
Give 3 disadvantages of a country being in a trading bloc
- Unethical firms can struggle with regulations
- No government revenue from tariffs
- External tariffs can increase the cost of raw materials
Define protectionism
Government protection of home infant industry by controlling imports with tariffs
Give 4 examples of non-tariff trade barriers
- Packaging standards
- Quota
- Import ban
- Quality Conditions
Give 4 reasons for protectionism
- Incubate infant industry
- Response to import dumping
- Employment protection
- Raise government revenue
Define import dumping
A country subsidising its goods so low that it injures industry
Draw the Diagram for a tariff
See book
What Is the potential downside of a tariff?
Retaliation
Draw the diagram for a quota
See book
What is the WTO?
An international organisation that aim to create free trade
Give 3 advantages of the WTO on countries’ business
- Avoids trade wars
- Creates new trade opportunities
- Encourages competitiveness
Give 3 disadvantages / evaluation points about the WTO
- Questions over their actual power
- Stops protectionism
- Unfavourable to poor countries
What is the G20?
A group of the 20 richest countries in the world who gather to protect industry and create global financial stability
What is the IMF?
A body who provide advice and loans to struggling countries
What do the World Bank do?
Encourage development in poor countries through finance and advice
What is meant by a bilateral trading agreement?
Trade between just 2 economies
What is meant by a multilateral trading agreement?
Trade between more than 2 economies
How does appreciation impact the BOP?
Imports increase
Exports decrease
————————-
BOP decreased
What does appreciation do to employment levels?
Reduces them
What is the eurozone?
The use of a single currency between groups of countries
Why is there no manipulation of the exchange rate in the Eurozone?
There is a single currency
Why can the Eurozone be very bad?
If one country becomes less competitive, it can be difficult for them to use the same currency as a booming country
