Global Interdependence Flashcards
What are the key elements in the definition of Globalisation?
Growth in trade, international investment, and the rapid movement of information and people
Why do open economies grow faster?
Globalisation has allowed the developing world new access to markets, technologies and investment
Describe the main linkages between economies
People (tourism, workers, immigrants), trade in goods and services, financial capital
Why has world trade grown so fast?
Due to advances in transport and communication and the successes of world organisations such as the World Trade Organisation
Describe some of Australia’s globally significant industries
Manufactured goods (iron ore, coal, chemicals, transport equipment, automotive products) and services (transport, travel, commercial services)
Why is merchandise trade much larger than trade in services?
Goods are generally easier to trade than services. Many services are non-tradable such as exporting a restaurant meal
Explain why there is a positive relationship between trade and economic growth
There is a strong positive correlation between trade and GDP per capita. Trade plays a crucial role in driving economic growth, development and job creation around the world
What is the largest category of world trade?
Manufactures
Describe the main types of services that are traded
Transport, travel, and commercial services
Manufactured goods account for _% while services account for _%
Manufactured goods = 76%
Services = 24%
Which three countries are the world’s leading exporters?
United States, United Kingdom, Germany are the worlds largest exporters of commercial services. China, United States and Germany dominate world trade.
Explain why China has become the world’s largest exporter
China had a large number of dominant industries that created products and materials for export. They joined the WTO in 2002 and quickly overtook the US
Explain how a currency depreciation will affect a country’s trade
If the AUD depreciates, Australian exports become cheaper to overseas buyers, while imports increase in price to Australian buyers. Therefore, exports increase while imports decrease.
How does world economic growth impact on Australia’s trade?
Australia’s exports are dependent on foreign demand. Increased world economic growth will increase demand for Australia’s exports.
How will an increase in productivity affect Australia’s trade?
Productivity increases cost efficiency through increasing output per worker. The cost efficiency of domestic firms relative to foreign firms will determine their success in the global market.
Why is productivity important for a country’s competitiveness?
An increase in productivity will increase competitiveness. Real unit labour cost will fall is productivity rises or wage costs fall, increasing competitiveness
Define international competitiveness
The ability of a country to compete successfully against other countries in international trade
Explain the key factors that affect a country’s international competitiveness
Economic performance, government efficiency, business efficiency, infrastructure.
What is the TWI?
The TWI measures the change in the value of a currency relative to its major trading partners
Describe the trend in Australia’s competitiveness since 2017
Real TWI has decreased and the Real Unit Labour Cost has slightly decreased, increasing competitiveness
What impact does an appreciation have on a country’s international competitiveness?
An appreciation in a country’s currency (increase in TWI), will cause export prices to rise, decreasing competitiveness
Describe the purpose of the ‘Big Mac’ index
The Big Mac index compares the prices for a Big Mac sold in McDonald’s stores in different countries of the world. The index is useful in determining whether an exchange rate is under or overvalued.
What does the purchasing power parity mean?
The PPP is the theory that states that goods should sell for the same prices around the world
Explain why the prices of Big Macs are not the same worldwide
Due to differences in the costs of producing a Big Mac across countries. Prices reflect the costs of key inputs such as raw materials and wages. Real wages are determined by labour productivity.
Define globalisation
The opening of international borders to the flows of trade, investment, immigration, information and technology.
What is the ‘engine of globalisation’?
Trade
How is trade openness measured?
The ratio of a country’s trade to GDP
Describe the five different indicators of globalisation
Flows of trade = Total trade (% of GDP), tariff rate,
Investment = FDI net inflows,
Technology and Information = Fixed broadband subscribers, Mobile phones per 100people,
Immigration = international tourist arrivals
Describe three main causes of globalisation
The liberalisation of markets to the flow of goods, services and investment, Regional trading groups and Multinational corporations
Outline three arguments against globalisation
Increases environmental damage, can enable the rapid spread of a pandemic, higher unemployment among lower-skilled workers
Outline three arguments for globalisation
Access to a wider variety of goods and services, reduces global poverty, lowers prices
Discuss the impact of the COVID pandemic on globalisation
The pandemic was a reminder of how we all live in an increasingly interconnected world. The world was plunged into its deepest economic contraction since the Great Depression. To control the spread, many countries imposed strict lockdowns, many businesses closed and many lost their jobs. International and domestic borders were closed.
