Globalisation

Question 1

characteristics of globalisation

Answer 1

-free movement of capital and labour across international boundaries
-free trade in goods and services between countries therefore industrialisation in developing countries
-availability of technology and intellectual capital (knowledge of employees) to be used on an international scale

Question 1

factors that attract multinational corporations (MNCs) to invest in an emerging country

Answer 1

-availability of cheap labour and raw materials
-good transport links
-access to different markets and ideas
-pro-foreign investment government policies

Question 2

causes contributing to globalisation

Answer 2

-improvement in communication technology, Internet makes communication for international trade cheaper and easier
-firms expanding overseas leading to economics of scale
-MNCs as labour is cheaper therefore profits are greater leading to increased FDI

Question 3

benefits of globalisation to economies

Answer 3

-trade encourages countries to specialise in good/service they are best at producing therefore output increases
-allows countries to have a comparative advantage
-lower production costs cause lower prices for consumers
-consumers have greater choice
-increased awareness of economic shocks
-increased growth and employment which are 2 government macro objectives

Question 4

drawbacks of globalisation on economies

Answer 4

-can lead to economic dependency leading to instablility (eg if USA go into recession and reduces imports, it causes Europe to enter recession too)
-domestic firms can be outcompeted by foreign firms
-can potentially cause prices to rise, as there is more employment there is more disposable income and more demand for goods. if supply cannot match the demand then the prices of goods increase

Question 5

positive effects of MNCs

Answer 5

-FDI by MNCs creates new jobs and brings new skills and wealth to an economy
-MNCs can benefit from economies of scale helping them to be more efficient
-MNCs raise living standards by providing employment

Question 6

negative effects of MNCs

Answer 6

-exploit workers and pay them lower wages than developed countries
-local firms can be outcompeted as cannot match the economies of scale
-can withdraw profits from one country and place it in another country with lower corporation tax therefore the former country gain no tax revenue

Question 7

consequences of globalisation for developing/emerging countries

Answer 7

-MNCs might exploit workers through low wages
-Skilled workers often leave for more developed countries reducing the countries potential economic growth (brain drain)

Question 8

consequences for globalisation for developed countries

Answer 8

-cheap overseas of production has led to reduction of some industries in developed countries causing structural unemployment
-as more MNCs produce in emerging countries, imports increase for developed countries which could have negative affect on balance of payments