4.1 International Economics Flashcards
State Globalisation
the ability to produce any good or service anywhere in the world, using raw materials, components, capital and technology from anywhere, sell the resulting output anywhere and place the profit anywhere
How can Globalisation be interconnected?
Through global networks of trade, capital flows, and the rapid spread of technology and global media
What is Globalisation driven by? What has it done for the people?
- By advancement in communication, transportation, and technology, which have made it easier for people and businesses to connect and operate on a global scale
- Difference in tax system - some countries have the corporate tax in a bid to attract inflows of foreign direct investment
State 3 key characteristic of globalisation?
- deeper specialisation of labour in making specific component parts of technology transfers. This leads to greater economies of scale as they produce more whilst being specialised.
- increasing connectivity of people, communities and firms through network
- An increase in the ratio of the value of overseas trade to a nation’s GDP
State 3 key factors that contribute to Globalisation
- Improvement in transport infrastructure - this is a cheap and reliable method to allow production to be separated in the world
- Improvement in IT and communication - allows firms to operate across the globe
- **International financial market **- provided the ability to raise money and move money around the world
State one positive impact of globalisation to consumers
Consumers have more choice since there is a wider range of goods available from around the world. This can lead to lower prices as firms take advantage of comparative advantage (ability for economy to produce at a low opportunity cost) an prdouce in low labour cost countries e.g. India.
State one negative impact of globalisation to consumers
More available goods could lead to a rise in price, because of rising income so demand will rise (show diagram in exam)
Give two negative impacts of globalisation for workers with evaluation.
- Increased migration means lower wages but migrants can also provide important skills and an increase in AD which increases n.o. of jobs
- The wages for high skilled workers appear to be increasing, since there is more demand for their work, which increases inequality. However, TNCs might provide training for workers and create new jobs
Give one positive impact of globalisation for producers
- They’re able to employ low skilled workers much cheaper in developing countries and can exploit comparative advantage and have larger markets, both increases profit
Give one negative impact of globalisation for producers
- Firms who are not able to compete internationally will lose out because they would not be able to source products from more countries. This increases risk as the collapse of the market in one company will have a larger impact on the firm
Give one positive impact of globalisation for the government
- gov may recieve high taxes since TNCs pay tax and so do the people they employ. However they could lose out through tax avoidance (tax payer trying to minimise the amount of tax they have to pay e.g. through grants).
Give one negative impact of globalisation for the government
TNC’s have power to bribe and lobby government (Lobbying is legal practice of public campaigns to put pressure on gov to generate policies. Bribery is illegal way of paying something for gain, special treatment etc.. This could lead to corruption.
Give two negative impact of globalisation to the environment with evaluation
- Increase in world production has led to increased demand for raw materials, which is bad for environment.
- Increased trade can lead to more emissions
- However, globalisation means the world can work together to prevent huge climate changes and share ideas and technology.
Give one positive impact of globalisation for economic growth
- increases investment within countries; the investment of TNCs represents an injection (income into circular flow from sources outside households and firms) into the economy, and which will have a larger impact due to the multiplier.
This creates an incentive for countries to make supply-side improvements to encourage TNCs to operate in their countries.
Give another postive impact of globalisation for economic growth with evaluation
- TNCs may be bring world class management techniques and technology which can benefit all industries as the techinques and tech are available for them too. However, power of TNCs can cause political instability as they may support regimes (gov) which are unpopular.
