4.1 - International Economics Flashcards
What is globalisation?
Globalisation is the increasing integration of economies internationally, becoming more like a single economy.
Give a characteristic of globalisation.
Free movement of capital and labour from country to country.
Give another characteristic of globalisation.
Free trade of goods and services between countries.
Give a third characteristic of globalisation.
The availability of technology and intellectual capital which may be used on an international scale.
Give a fourth characteristic of globalisation.
A greater number of countries being involved in international trade.
Describe an extra characteristic of globalisation.
Increasing integration of production: different parts of a good being produced in different countries. This may come due to higher availability of technology used on an international scale.
What are MNCs?
MNCs (Multi national corporations), are firms which operate in several different countries. Growth of an MNC is a key feature of globalisation.
Give a cause of globalisation.
Trade liberalisation - The removal of tariffs and restrictions on trade routes between countries can allow for smoother international trade, significantly boosting globalisation.
Describe and explain another cause of globalisation.
Opening up of new (or more) markets to trade and investment - Introducing relatively new markets with new inventions of goods is beneficial as retailers will be more likely to invest, and trade will be boosted largely. An example is after the Soviet Union collapsed, former communist nations in Eastern Europe began opening up markets and trading with other nations.
Give a third cause of globalisation.
Expansion of global trading blocks - Growth of trade blocks is beneficial because establishment of trade deals and economic relations can encourage integration of economies and possibly lower tensions.
Describe and explain a fourth cause of globalisation.
Improved technologies - Through software such as Microsoft Teams, Zoom, Skype…, communication has been revolutionised, especially during COVID-19. This lowers communication costs significantly, reducing the need to travel and pay fares. For firms, there are no labour costs due to online communication, hence this is an easy way to access foreign markets.
When is there free trade between countries?
Free trade may occur when there are no restrictions on the flow of goods and services between countries.
What is absolute advantage?
Absolute advantage is where a country uses fewer raw materials than another country to produce a good or service; this means greater efficiency.
Describe and explain comparative advantage.
This is where a country can produce a good with a lower opportunity cost than trading partners. So this means a country can produce several goods at a lower cost.
Give an assumption of comparative advantage.
Homogenous goods.
