Globalisation and trade Flashcards
What is globalisation?
process by which world’s economies are becoming more closely integrated
What is foreign direct investment?
investment undertaken in one country by companies based in other countries
What are the three main reasons for foreign direct investment?
- market seeking, ie want to sell in that market so produce there too
- resource seeking, eg use of oil, gas, skilled labour or cheap labour
- efficiency seeking
State four positive effects of foreign direct investment?
- increased employment
- increased tax revenue
- increased capital or technology
- therefore increased economic growth
Why might positive effects of foreign direct investment be diluted?
- profits repatriated
- may have to give tax concessions to attract the investment
- technology may not be disseminated more widely
Define transnational company.
company whose production is carried out in more than one country
What is the WTO?
World Trade Organisation, a multilateral body responsible for overseeing conduct of international trade
Give five key reasons for the increase in globalisation.
- better transportation
- better communication (internet)
- reduced trade barriers
- deregulation of financial markets
- migration
What is deindustrialisation?
process where structure of economic activity shifts from manufacturing towards service sector
What is sustainable development?
development that meets present needs without compromising ability of future generations to meet future needs
What is the key negative impact of globalisation on the environment?
Increased transportation so more emissions of greenhouse gases so climate change
Define absolute advantage.
ability to produce a good more efficiently, eg with less labour
Define comparative advantage.
ability to produce a good relatively more efficiently, ie at lower opportunity cost
What is the law of comparative advantage?
There are gains from trade arising when countries (or individuals) specialise in production of goods or services in which they have comparative advantage.
What does a trading possibilities curve show?
consumption possibilities (basically a combined production possibility frontier) under free trade conditions, eg agricultural goods versus manufactured goods
What is the main risk of a country specialising in certain goods and services?
inability to produce other goods and services so reliant on other countries, which may be an issue due to war, tariffs, etc (particularly if reliant on eg food or energy imports)
Define the terms of trade.
ratio of index of export prices to index of import prices
If terms of trade for a country decrease, is this good or bad for the country and why?
bad, as will need to export more goods to acquire same volume of imports
Does decrease in terms of trade always mean country worse off?
No, as could have increased volume of exports by more than decrease in terms of trade.
Will demand for basic food tend to be elastic or inelastic?
inelastic
Will demand for raw materials tend to be elastic or inelastic?
elastic (tends to move with economic cycle)
What did Heckscher and Ohlin say that comparative advantage for a country depended on?
its relative endowments of factors of production, eg had comparative advantage in labour-intensive product if it has abundant labour relative to another
What % of world exports were from China in 1982 and in 2020?
1982: 1%
2020: 12%
In 2019, what % of UK exported goods went to (a) EU and (b) USA?
Exported goods to EU: 46%
Exported goods to USA: 17%
In 2019, what % of UK exported services went to (a) EU and (b) USA?
Exported goods to EU: 37%
Exported goods to USA: 26%
Define emerging economies.
economies that have experienced rapid economic growth with some industrialisation and characteristics of developed markets
Which 5 countries formed the BRICS countries?
Brazil, Russia, India, China, South Africa
Which country is the world’s biggest economy by GDP?
China
Are advanced countries most likely to have a comparative advantage in capital-intensive or labour-intensive products?
capital-intensive
Are developed countries most likely to have a comparative advantage in capital-intensive or labour-intensive products?
labour-intensive
Name three significant events that have impacted the pattern of world trade in the last 10 years.
war in Ukraine
Brexit
Covid-19
