Globalisation

Question 1

What is globalisation?

Answer 1

The process of increased economic integration between countries, characterised by increased trade and investment flows

Question 2

What is gross world product?

Answer 2

The total value of all goods and services produced in the global economy. It is the total of the GDP of all countries in the world.

Question 3

What are the main causes / indicators of globalisation?

Answer 3

Trade
Technology
Financial flows
Transnational corporations
Migration
The international division of labour

Question 4

How has trade contributed to globalisation?

Answer 4

Trade has increased due to free trade agreements and advancements in technology, increasing the connections between economies

Question 5

How has investment contributed to globalisation?

Answer 5

Financial deregulation has led to increased portfolio and foreign direct investment, increasing the connections between economies

Question 6

What is the difference between portfolio and foreign direct investment?

Answer 6

Portfolio investment refers to foreign investment provided in the form of loans or buying less than 10% ownership of a business

Foreign direct investment is a more long-term investment where foreigners purchase more than 10% ownership of a business or establish a business themselves

Question 7

How has technology contributed to globalisation?

Answer 7

Transport technology like ships and planes has made it cheaper to transport goods, and the internet has made it easier and faster to communicate with people overseas

Question 8

What is a transnational corporation?

Answer 8

A business owned and operating in more than one country

Question 9

How have TNCs contributed to globalisation?

Answer 9

1) When firms set up parts of their production in different countries they have to transport goods between them
2) They also then transport the finished goods from those countries to customers in countries around the world

Question 10

How has migration contributed to globalisation?

Answer 10

People moving between countries increase remittances and trade between those countries

Question 11

What is the international division of labour?

Answer 11

The specialisation of particular countries in producing specific products or parts of products

Question 12

Why does the international division of labour contribute to globalisation?

Answer 12

1) If countries specialise in different products, they then trade in order to get the products they do not specialise in
2) Low income countries also now access the global economy by specialising in low skilled manufacturing such as clothing

Question 13

What is the international business cycle?

Answer 13

The synchronised fluctuations of countries’ business cycles in the global economy

Question 14

Why does the international business cycle occur?

Answer 14

Due to trade and financial flows between countries, when some countries experience growth it increases economic growth in other countries as well (and vice versa in a downturn)

Question 15

What is the regional business cycle?

Answer 15

The synchronised business cycle fluctuations of countries that are close to each other

Question 16

Why do regional business cycles occur?

Answer 16

Countries that are close to each other usually have high levels of trade and investment between them, so growth in one country has a significant impact on growth in neighbouring countries (and vice versa in a downturn)

Question 17

What has the trend been in globalisation?

Answer 17

Globalisation has been accelerating for the past 60 years, but has slowed down in the past 10 years

Question 18

Why is globalisation slowing down?

Answer 18

1) Increased numbers of trade disputes
2) The covid-19 pandemic
3) Geopolitical tensions

Question 19

What are some examples of recent trade disputes?

Answer 19

1) Disputes over the ineffectiveness of the WTO
2) The US-China trade war
3) Chinese protection against Australia

Question 20

How has the pandemic caused globalisation to slow?

Answer 20

1) During the pandemic, there was lower service exports (due to border closures) and disrupted shipping of goods
2) Governments also increased protection on some essential goods (such as medical equipment) due to fears of not being ‘self-sufficient’

Question 21

How have geopolitical tensions caused globalisation to slow?

Answer 21

1) Sanctions on Russia due to their invasion of Ukraine is reducing trade and financial flows
2) Concern about cybersecurity has led Western countries to restrict the use of Chinese technology such as Huawei 5G infrastructure, and China subsidises its technology industries for self-sufficiency