Further knowledge Flashcards
Advantages of globalisation
a) Economic Benefits
✅ Increased Trade & Market Expansion – Companies access larger consumer markets, boosting business opportunities.
✅ Economic Growth & Job Creation – Developing nations benefit from FDI, improving infrastructure and employment.
✅ Lower Consumer Prices – Competition and outsourcing reduce production costs, making goods cheaper.
b) Technological Advancements
✅ Faster Innovation & Knowledge Sharing – Ideas, research, and technology spread worldwide, accelerating progress.
✅ Improved Communication – The internet and digital platforms enable instant global interaction.
c) Cultural Exchange
✅ Diversity & Cultural Awareness – People experience different traditions, languages, and ideas, promoting tolerance.
✅ Better Education & Career Opportunities – Students and workers can study or work abroad more easily.
d) Political & Social Cooperation
✅ Stronger Global Institutions – International cooperation helps tackle global issues like poverty, terrorism, and pandemics.
✅ Human Rights Advocacy – Global awareness puts pressure on governments to improve human rights standards.
Disadvantages of globalisation
a) Economic Drawbacks
❌ Income Inequality – Wealth is concentrated in developed countries and corporations, widening the rich-poor gap.
❌ Job Losses in Developed Nations – Outsourcing leads to manufacturing job losses in high-wage countries.
❌ Economic Vulnerability – A financial crisis in one country (e.g., the 2008 Global Financial Crisis) can spread worldwide.
b) Environmental Consequences
❌ Increased Carbon Emissions – Global trade and industrialization contribute to climate change.
❌ Deforestation & Resource Exploitation – Companies exploit natural resources for economic gain.
c) Cultural Erosion
❌ Loss of Local Identity – Westernization dominates global culture, threatening indigenous traditions.
❌ Cultural Homogenization – Unique cultural elements fade as global brands take over.
d) Political & Social Issues
❌ Loss of National Sovereignty – Global institutions influence domestic policies, reducing government control.
❌ Exploitation of Labor – Multinational corporations sometimes take advantage of low-wage workers in developing nations.
Free trade
Free trade is an economic policy where goods and services move across borders without government-imposed restrictions such as tariffs, quotas, or subsidies. It promotes unrestricted commerce, allowing countries to specialize in producing goods they are most efficient at while importing what they lack.
Allocative efficiency
Allocative efficiency occurs when resources are distributed in a way that maximizes consumer and societal welfare. It happens when the price of a good or service equals the marginal cost of production (P = MC), meaning that resources are allocated to their most valued use.
Productive efficiency
Productive efficiency occurs when a firm or economy produces goods at the lowest possible cost, using the least amount of resources. It is achieved when production is on the lowest point of the average cost curve (AC).
Interest rates
represent the cost of borrowing money or the return on savings and investments.
Effects of high interest rates
- Increases borrowing costs, reducing consumer and business spending.
- Attracts foreign investment, leading to currency appreciation.
- Lowers inflation by reducing demand.
- Increases savings as deposits earn higher returns.
Effects of low interest rates
- Encourages borrowing, boosting economic activity.
- Weakens the currency, making exports more competitive.
- Can increase inflation due to higher spending.
- Reduces savings incentives, as returns on deposits decline.
Interest rates and globalisation
Interest rates influence capital flows, exchange rates, and international trade. Higher domestic rates attract foreign investors, increasing capital inflows but potentially making exports less competitive due to currency appreciation.
Government deficit
A government deficit occurs when a government’s expenditures exceed its revenues within a given period (usually a fiscal year). This means the government is spending more on public services, infrastructure, and social programs than it collects from taxes, duties, and other sources.
Implications of a Deficit:
- Can stimulate economic growth by increasing government spending.
- If persistent, it leads to higher national debt and interest payments.
- Affects investor confidence and may impact credit ratings.
Monetary policy
refers to the actions taken by a country’s central bank (e.g., the Reserve Bank of Australia) to control money supply, interest rates, and inflation to achieve economic stability and growth.
Objectives of Monetary Policy
- Control Inflation – Keeping inflation within a target range (e.g., 2-3% in Australia).
- Stabilize Economic Growth – Preventing recessions or overheating economies.
- Manage Employment Levels – Encouraging job creation through economic stimulation.
- Ensure Financial Stability – Avoiding excessive asset bubbles or financial crises.
Securitisation
Securitization is the process of converting assets (like loans or debts) into tradable financial securities that investors can buy.
Causes a change in ToT
- Changes in Global Demand and Supply
- Exchange Rate Movements
- Changes in Commodity Prices
- Tariffs and Trade Policies
- Inflation Differentials
- Productivity and Technological Advancements
- Global Economic Conditions & Shocks
