4.1 globalisation Flashcards
What is the GDP?
The total value of goods and services produced in a country within a given time period
What are emerging economies?
Economies that have increasing growth rates but relatively low income per head
What is globalisation?
Economic integration of different countries through increasing freedoms in the cross border movement of people, goods/services, technology and finance
What does BRICS stand for ?
Brazil
Russia
India
China
South africa
What does MINT stand for ?
Mexico
Indonesia
Nigeria
Turkey
What is the impact of economic growth on businesses ?
–> Increased profits as they enter new markets
–> Reduced costs of production as lower labour costs and cheaper raw materials
–> Increased trade opportunities as demand for goods and services increased
–> Increase in FDI as they want to invest in growing economies
What is the impact of economic growth on individuals ?
–> Reduced unemployment
–> Increased average incomes
–>Access to quality public services as more tax revenue generated
What are the 4 indicators of growth ?
- GDP
- Literacy
- Health
- HDI
What is the difference between imports and exports ?
Imports are goods and services bought by people and businesses in one country from another country
Exports are goods and services sold by domestic businesses to people or businesses in other countries
What is specialisation ?
Occurs when a country or business decides to focus on producing a particular good or service
What are the advantages of specialisation ?
- lower unit costs
- economies of scale
- lower consumer prices
- increase profit margins
- excess output sold abroad as exports
- competitive advantage
What is foreign direct investment ?
Investment by foreign firms which result in more than 10% ownership of domestic firms
How do businesses typically grow through FDI ?
Mergers
Takeovers
Partnerships
Joint ventures
Advantages of FDI ?
Increased economic growth
Increased job opportunities
Access to knowledge and expertise from foreign investors
What is the difference between inward FDI and outward FDI ?
Inward FDI occurs when a foreign business invests in the local economy
Outward FDI occurs when a domestic business expands its operations to a foreign country
What is trade liberalisation ?
Trade liberalisation is the removal or reduction of barriers to trade between different countries
What is the benefits of trade liberalisation?
> Increased international trade allows businesses to increase their market size —-> economies of scale
> Free trade helps businesses to reduce costs as imported raw materials and components can be sourced more cheaply
What is the drawback of trade liberalisation?
> Domestic / Infant industries may not be able to compete against international firms
> Some industries may be subject to dumping as businesses abroad may sell excess products at unfairly low prices
What are the reasons for increased globalisation?
- growth of global labour force
- migration
- reduced trade barriers
- political change
- reduced transport and communication costs
- increased importance of global companies
- increased investment flows
What is protectionism ?
When a government seeks to protect domestic industries from foreign competition
What is a tariff ?
tax placed on imported goods from other countries
What does a tariff do to the price ?
Increases the price of imported goods which helps to shift demand for that product/service from foreign businesses to domestic businesses
What are the benefits of a tariff ?
> They protect infant industries so they can eventually become more competitive globally
An increase in government tax revenue
Reduces dumping by foreign businesses as they cannot sell below the market price
What are the disadvantages of tariffs ?
> Increases the cost of imported raw materials which may affect businesses who use these goods for production, leading to higher prices for consumers
> Reduces competition for domestic firms who may become more inefficient and produce poor quality products for their customers
> Reduces consumer choice as imports are now more expensive and some customers will be unable to afford them
What is a quota ?
government imposed limit on the amount of a particular product allowed into the country
What are the benefits of quotas ?
- > To meet extra the demand, domestic businesses may need to hire more workers which reduces unemployment and benefits the wider economy
- > The higher prices for the product may encourage new businesses to start up in the industry
- > Countries are able to easily change import quota as market conditions change
- > Foreign countries view a quota as less confrontational to their business interests than tariffs
- > Their exporters can still sell their goods at the higher price in domestic markets (but a limited amount)
What are the disadvantages of quotas ?
> Quotas limit the supply of a product and whenever supply is limited, the price of the product rises
> They may generate tension in the relationship with trading partners
> Domestic firms may become more inefficient over time as the use of quotas reduces the level of competition
What is government legislation?
Governments can impose laws to restrict certain imports to protect customers and businesses
What is the benefit and drawback of gov. legislation?
> Allows domestic firms to grow as they have limited competition from businesses abroad
> Can lead to retaliation from countries facing the legislation
What is domestic subsidies ?
Payments are given to domestic businesses to help lower costs of production
What is the benefits and drawbacks of domestic subsidies ?
> Reduced costs can lead to lower prices making domestic firms more competitive in international markets as their exports may be cheaper
Businesses remain competitive and this helps to protect jobs in the industry
> Businesses may become inefficient as they know as they know their costs are being subsidised
What is a trading bloc ?
a group of countries that form an agreement to reduce or eliminate protectionist measures between each other
What is trade creation ?
Trade creation means that businesses are able to enter new markets which can lead to an increase in sales volume and sales revenue
What are the three main trading blocs?
EU
NAFTA
ASEAN
What is the benefits for businesses inside the bloc ?
- Wider markets
- External tariff walls - tax applied to imported goods by a group of countries that have formed a trade agreement
- Infrastructure support
- Free movement of labour
What is the drawback for businesses inside the bloc ?
- Increased competition
- Common rules and regulations
- Retaliation
- Inefficiency
