Extract One Flashcards

1
Q

Globalisation Definition

A

The process in which national economies have become increasingly integrated and interdependent.

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2
Q

Factors promoting Globalisation

A
  • Reduction in protectionism
  • Reduction in international capital movement restrictions
  • Fall in real transport costs
  • Developments in IT and communication
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3
Q

Reduction in protectionism

A

Removal of tariff’s, quotas ect that remove trade to allow trade/globalisation, more integration.

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4
Q

Reduction in international capital movement restrictions

A

Foreign direct investment to flow from developed countries to developing countries, more freely, where emerging economies have benefitted from FDI/MNC.

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5
Q

Fall in real transport costs

A

Incredibly easy for firms to transport their goods, with the increasing economies of scale of shipping/air cargo, getting larger.

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6
Q

Developments in IT and communication

A

Global supply chains can be managed in an effective way, across the world.

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7
Q

Costs of Glabalisation

A
  • Income inequality
  • Structural unemployment
  • Greater effect of external shocks
  • Environmental costs
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8
Q

Income inequality

A

Certain governments through corruption, higher growth rates may not transpire to higher incomes to all, macro objective of fair distribution of income not met, parts stay in poverty.

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9
Q

Structural Unemployment

A

The greater competition may lead to decline in infant industries, may not have economies of scale or capital to compete internationally. Macro objective of low unemployment increase poverty/dependancy.

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10
Q

Environmental Costs

A

High costs, high FDI an increasing focus on growth creating negative externalities with air pollution, resource depletion and degradation, not sustainable for future generations.

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11
Q

External Shocks

A

More reliant/dependant on each other, reducing incomes/prosperity levels, unemployment increase benefits, harm the balance of payments.

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12
Q

Benefits of Globalisation

A
  • Improved allocation of resources
  • Higher GDP growth
  • Technology transfer
  • Reduced trade restriction
  • Lower costs
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13
Q

Higher Growth

A

Allows countries to exploit their comparative advantage, where specialisation maximises export revenue. AD (component)/demand increases unemployment reduce.

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14
Q

Improved allocation of resources

A

Countries export their specialised comparative advantage and import the things they cannot produce efficiently, resources are diverted to best producers, solving economic problem.

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15
Q

Reduced trade restriction

A

Reduces protectionism increases market size and consumer welfare increases from greater access to g/s and allocative efficiency.

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16
Q

Lower costs

A

Can source raw materials from around the world and find cheapest prices. Experience lower costs translating into prices allowing them to increase market share and profits, promoting long term investment and dynamic efficiency.

17
Q

Technology transfer

A

Greater access to new tech, can spread faster than closed economies. Tech advancements faster improving efficiency and profits for firms. Prices reduce and consumers benefits from new products consumer, welfare maximised.

18
Q

FDI Definition

A

Spending by MNC’s in physical capital in overseas operations.

19
Q

Two types of FDI

A
  • Building new factories/capital in countries, improve capacity and LRAS increases and AD.
  • Purchasing firms in other countries, profits diverted. Only AD increases initially.
20
Q

Quota Definition

A

Imposing a physical limit on the quantity of a good/service that can be imported.

21
Q

Trade Barrier Definition

A

Restriction of trade between nations

22
Q

Protectionism Definition

A

The protection of domestic industries from foreign competition.

23
Q

Tariff Definition

A

A tax levied on imports.

24
Q

Tariff Diagram - Removal

A
Reduction in supply shifting downwards, 
EXTENSION IN DOMESTIC DEMAND Q3 - Q4
CONTRACTION IN DOMESTIC SUPPLY Q2 - Q1
Volume of imports increased between box 2,4
Trade Creation
25
Q

Comparative Advantage

A

States a country should produce/specialise in the goods/services it can produce at the lowest opportunity cost.

26
Q

Absolute Advantage

A

Occurs when a country can produce at a lower unit cost than another nation.

27
Q

Economic Efficiency

A

Where every resource is allocated ensuring that waste and inefficiency is minimised.

28
Q

How can trade % GDP exceed 100

A

Industries produce more money from exports than the entire domestic economy. Money from exports allows them to purchase imports into excess of their domestic economy could otherwise support.