Globalisation Flashcards
List out negative effects of globalisation
- Workers have few rights in some countries
- Child labor
- Affect local communities by not enforcing environmental protection
Define outsourcing
Move labour or production to an area or country where costs are lower
What are the main objectives of a government?
- Stable prices
- Low unemployment
- Economic growth
- Surplus on Balance of Payments
Causes of inflation of price
- High demand for product - increase the price makes more profit
- Cost of producing the products are high so the business must increase the price to maintain profit
What happens in a boom?
- Businesses produce more goods
- Businesses invest in more machinery
- Less money is spent by the Government on unemployment benefits
- More money is collected by the Government in income tax and VAT
What happen in a recession
- Businesses cut back on production
- Some businesses may go bankrupt
- Individuals may lose their jobs
- More money is spent by the Govt on unemployment benefits
- Less money is collected by the Govt in income tax and VAT
Define external cost
External costs are the costs to other people
Define external benefits
benefits to people who are not involved in the business
Factors that influence exchange rates
- Inflation: If inflation in the UK is lower than elsewhere, then UK exports will become more competitive and there will be an increase in demand for £s. Therefore the rate of £ will tend to increase.
- Interest Rates:If UK interest rates rise relative to elsewhere, it will become more attractive to deposit money in the UK, Therefore demand for Sterling will rise.
- Change in competitiveness
- Relative strength of other currencies
- Balance of Payments
Benefits of multinational companies
- Normally a large number of jobs are provided as a result of it coming to the area.
- An injection into the local economy that it enters
- Provide training and education for employees.
- Pay tax in that country
Drawbacks of multinational companies
- Often employ ‘home nation’ managers, meaning high wage jobs aren’t given to locals.
- Can afford to charge low prices as a large business, pushing smaller local competition out.
- Often so large that they can influence government’s decisions with regards to grants, tax and land.
Define globalisation
process by which the world is becoming increasingly interconnected. We now communicate, trade, travel and share each other’s cultures more easily around the world.
Describe the advantages given out by globalization
Start selling exports to other countries – opening up foreign markets - gain more profits
Open a factory/operations in other countries (become multinational)- labour in Asia
Import products from other countries to sell in your own country
Describe the threats given out by globalization
- Increasing imports into home market from foreign competitors
- Increasing investment from multinationals to set up operations in home country
- Employees may leave business that cannot pay the same or more than international competitors
Effects of a increase in interest rates(monetary policies)
- Loan payback more expensive
- This limits business expansion and reduces profits
- Demand falls as customers pay higher interest on loans
- Savings increase
