Econplusdal extract 1 Flashcards
What is meant by the term ‘globalisation?’
Globalisation is the process in which national economies have become increasingly intergrated and inderpendant
What is meant by the term FDI?
Foreign direct investment is the spending by multinational coorperations in physical capital and in their overseas operations
What is meant by the term trade barrier?
A trade barrier is any obtsicle that restricts trade between nations. Examples include tariffs, quotas, domestic subsidies and administration barriers like red tape and product standards
What is meant by the term protectionism?
Protectionism is the protection of domestic industries from foreign competition. This involves the erection of trade barriers such as tariffs, quotas, domestic subsidies and administration barriers like red tape and product standards
Other than trade, FDI and migration flows, state and explain two indicators of globalisation
- The number of global brands
- The transfer of technology
- The growth of the internet
Explain how the number of global brands is an indicator of globalisation
Because similar products sold under the same brand name across the world reflects the global integrated nature of the worlds economy
Explain how the transfer of technology is an indicator of globalisation
This is where technology developed in one country is made available in other countries due to multinational corporation investment and licensing technology to businesses across the world; a clear indicator of the increasingly integrated nature of the global economy
Explain how the growth of the internet is an indicator of globalisation
This has improved the efficiency of communication and the buying and selling of goods and services allowing for a greater integration of nations
Describe what is meant by the term globalisation
Globalisation is the process in which national economies have become increasingly integrated and interdependent. This phenomenon can be seen through a variety of indicators but most significantly through the value of trade and goods and services as a percentage of world GDP which has been increasing, indicating that countries are becoming more integrated.
Describe what is meant by the terms of trade
The terms of trade is an index that shows the value of a country’s average export prices relative to their average import prices. It is an indicator of the level of imports a given basket of exports can buy.
What is the equation for terms of trade?
Terms of trade: Index of export prices / Index of import prices X 100
Explain what is meant by a fall in the terms of trade
The terms of trade can worsen if export prices fall or import prices rise. The terms of trade is an index with a value of 100 in the base year; a worsening of the terms of trade due to higher productivity domestically reducing export prices would see this figure fall to 98, for example. This would mean that a basket of exports for a given country would be able to buy 2% less imports compared to what it could buy in the base year
Analyse two reasons why an increase in commodity prices can promote economic development for a developing country like Zambia (point 1)
Net exports will increase thus increasing aggregate demand, as net exports are a complement of aggregate demand, leading to economic growth and an increase in incomes.
This is because countries like Zambia have an abundance of primary resources, which are in high demand from advanced economies in the west and from emerging markets with price inelastic demand, thus as prices rise, revenues generated from their sale will increase.
GNI/capita will rise making basic life-sustaining goods and services more affordable, lifting people out of poverty.
Job prospects in the economy will improve as this increase in demand will encourage domestic firms to increase their output, thus increasing the demand for labour.
