4.3 Globalisation Flashcards
What are the characteristics of globalisation
It is the ever increasing integration of the worlds local, regional and National economies into a single international market
Involves free trade of goods and services with the free movement of capital
What factors have contributed to globalisation in the last 50 years
Trade in goods
Trade in services
Trade liberalisation
MNCs
International Financial flows
Communication
Containerisation
What is meant by international competitiveness
This is the ability of a nation to compete successfully overseas and sustain improvements in real output and living standards
How can countries achieve international competitiveness
Productivity
Unit labour costs
Exchange rates
Product quality
Regulation
Rate of innovation
What is meant by absolute advantage
When a country can produce a good or service using fewer resources and at a lower cost it than another country
What is meant by comparative advantage
This occurs when a country can produce a good or service at a lower opportunity cost than another country
What is meant by terms of trade and how is it calculated
This measures the volume of imports an economy can receive per unit of exports
Index price of exports / Index price of imports
What is meant by the Marshall-Lerner condition
This states that a devaluation in a currency only improves the balance of trade if the absolute sum of long run export and import demand elasticities is greater than or equal to 1
What does the J curve look like
Explain the J-curve effect
This occurs when a currency is devalued
Since the devaluation causes imports to become more expensive the total value of imports increases which worsens the deficit
Eventually the value of exports decreases which leads to a reduction in the trade deficit
What are the impacts of globalisation and global companies on individual countries
There could be trade imbalances between countries
This could cause inequalities in consumers access to health, education and markets
Could be income and wealth inequality if the benefits and costs of globalisation are not evenly spread
What are the impacts of globalisation and global companies on governments
Governments might lose power due to increases in international treaties meaning countries have to abide to certain rules
What are the impacts of globalisation and global companies on producers and consumers
They can earn benefits of specialisation and economies of scale as firms become larger
Firms are competitive which encourages lower average costs
International trade increase world GDP which increases consumer living standards and lifts people out of poverty
What are the impacts of globalisation and global companies on workers
They can take advantage of job opportunities across the globe
Could be structural unemployment because it is more efficient to manufacture abroad
What are the impacts of globalisation and global companies on environment
Could increase pollution through increased production and increased car use
Consumers show more concern towards the environment as their average incomes increase
