Globalisation

Question 1

what is Globalisation?

Answer 1

• the process by which economies are becoming more closely integrated.

Question 2

what are the causes of globalization?

Answer 2

-Migration
-International competitiveness
-Deregulations of financial markets
-Reduction of trade Barriers(WTO)
-Transport and communication costs

Question 3

what are the advantages and disadvantages of globalization ?

Answer 3

ADV:
-lower prices
-Benefits of trade
-greater unemployment
-benefits from economies of scale
-better movement of labor and capital

DIS-ADV:
Growing inequality
Higher structural unemployment
environmental costs
greater risks of external shocks

Question 4

what is intra-dependant?

Answer 4

these are countries that are more reliant on each other

Question 5

what is the J-curve?
and explain it?

Answer 5

This is when an economy goes into a current account deficit, in the short run. Before entering a surplus.

• a devaluation of the currency, initially pushes the current account further into deficit because of the inelasticity of domestic supply. (e.g excess supply or time lags)

Question 6

what are terms of trade?

Answer 6

the ratio between export prices and import prices

export prices
___________
import prices

Question 7

what is an absolute advantage and comparative advantage?

Answer 7

absolute advantage- is when a country/firm is able to produce goods and services more efficiently by using fewer resources.

comparative advantage- this is when a country/firm is able to produce goods and services at a lower opportunity cost.

Question 8

what is the marshall learner curve?

Answer 8

The condition is that devaluation will have a positive effect on the current account only if the sum of price elasticity demand for imports and exports is greater than 1.

Question 9

effects of the J-curve?

Answer 9

• It takes time for export businesses to increase their sales following a fall in price.
• Earning from selling exports may be insufficient to compensate for higher total spending on impoers. The balance of trade(X-M) may therefore initially worsen.
• in the short term a current depreciation may not necessarily improve the current account trade balance.
• if the price for imports is inelastic, then then countries will spend more of import , with the increase in price

Question 10

what is a MNC?
what are the advantages and disadvantages of an MNC

Answer 10

an MNC is a multi National Company

ADV:
-Increase competitiveness- lower prices
-incseae tax revenue for the government
-decrease unemployment levels
-incsease capital and technology

Dis-advantages:
- if shareholders are else where in the works, revenue may not flow in to the economy, and my flow back into other economies
- technology may not be appropriate or not disseminate

Question 11

what is economic growth vs development ? how is each measured and adv and dis-adv

Answer 11

Economics growth is an increase in GDP(the total value of goods and services produced in an economy), whereas economic development is the increase in development of people in an economy

develpment:HDI
growth:GDP

adv:
increase incomes
increase jobs
increase

dis-advatange:
negative externalities
sustainability
distribution of income