4.3 - globalisation Flashcards
Globalisation def
Process which bought closer links between diff economies across world
Factors promoting globalisation
Reduction in protectionism
Trade agreements
Reduction in restrictions
Greater labour mobility
Fall in transport costs
Strengths of globalisation
Increase choice for consumers
Growth of developing nations
Greater employment
Weaknesses of globalisation
Inequality - benefits developed more than developing
Greater employment can lead to brain drain
Environmental impact - quicker use of scarce resources
International competitiveness
Measures relative cost and value of country’s exports
What is int comp determined by?
SR - inflation / er
LR - education, health, macroeconomic environment
How can a country devalue the currency to improve int comp?
Cheaper exports - more demand = higher AD
More expensive imports = more demand domestic products = higher C
Strengths of int comp
Domestic firms = lower costs
Rise in demand for exports
Economy less dependent on C
Weaknesses of int comp
Retaliation
Countries who struggle to be comp = unemployment, lower AD (X-rev)
Terms of trade
A measure of countries relative competitiveness - depends on opportunity cost ratios
ToT equation
Index of av export price /
Index of av import price
x100
What does ToT decide?
Whether trade will take place between the two countries
Leads to higher stand of living but jeopardises int comp (as export prices rise)
Absolute advantage
One nation producing at a lower unit cost than the other
Produce more for same level of input / less resources
Comparative advantage
One nation has a lower opportunity cost of producing than another
Strengths of comparative advantage
- Understanding of whether trade should occur
- Higher efficiency - countries focus on producing their comparative advantage
