Globalisation

Question 1

Globalisation def?

Answer 1

an increase in interconnectedness and interdependence (rely on eachother) of economic activities and social relations

Question 2

What are some drivers of globalisation? (4)

Answer 2

-technological changes (reducing the cost of transmitting and communicating information)
-EOS
-diifferences in tax systems
-less protectionism (borders have opened and tariffs have fallen)

Question 3

What are some disadvantages of globalisation? (4)

Answer 3

-rising inequality/relative poverty
-threats to global commons
-trade imbalances (protectionist tensions)
-higher structural unemployment

Question 4

What are the benefits of globalisation for the UK economy?

Answer 4

-access to cheaper goods and services from emerging market countries (higher real incomes)
-bigger export market (chance to exploit EOS)
-more intense competition (drives innovation and economic efficiency)

Question 5

What are the drawbacks of globalisation for the UK economy?

Answer 5

-UK economy has less control (economy may become more vulnerable to external shocks)
-increase in global trade/output has an environmental effect (increased use of non-renewable resources and CO2 emissions)
-risk of stuctural unemployment in industries that lose demand to cheaper comp overseas

Question 6

What are the arguments for protectionism? (8)

Answer 6

-Infant industry argument (industry that just started- allows them to grow & have EOS)
-protect against dumping
-protect domestic employment
-protect against unfair low cost of labour abroad
-protect product standards
-to raise gov rev
-to improve an account deficit
-avoid overspecialisation

Question 7

when does a comparative advantage exist?

Answer 7

Exists when:
-the relative opportunity cost of production is lower than in another country
-a country is relatively more productively efficient then another

Question 8

what is factor endowment?

Answer 8

-if a person, firm or country specialises in the production of a good, it normally leads to a surplus in its production
-the existence of this surplus often leads to trade.

Question 9

weaknesses in the theory of comparative advantage?

Answer 9

-assumes equally productive factors of production
-assumes factors can swap what they produce with no reduction in efficiency
-some countries may not be able to export