Macro 22 - Globalisation

Question 1

What are the factors contributing to globalisation?

Answer 1

• Reduced use of protectionism
• Increased capital movement
• Fall in real transport costs
• Political and global changes - relations between countries
• Easier for firms to set up in other countries
• Improvements in communications and technology

Question 2

Define globalisation

Answer 2

Globalisation refers to the processes that have resulted in ever closer links between the world’s economies

Question 3

What are the general impacts of globalisation?

Answer 3

• Increase in living standards resulting from increased specialisation and trade through the law of comparative advantage. This leads to lower prices and more choice for consumers
• Increased interdependence of countries
• More global sourcing by multinational companies who operate in different countries. Workers may sometimes be exploited by these large companies
• Increase in the number of geographically mobile companies which increases unemployment as they move from area to area
• Increasing environmental damage and negative externalities

Question 4

What are the 3 main roles of the World Bank?

Answer 4

1- Granting reconstruction loans to war devastated countries
2- Granting developmental loans to underdeveloped countries
3- Promoting industrial development of underdeveloped countries by promoting economic reforms

Question 5

What are the 3 main roles of the International Monetary fund (IMF)?

Answer 5

• To ensure stability in the international monetary system - the system of exchange rates and international payments that enables countries to transact with each other
• To maintain stability and prevent crises in the international monetary system by reviewing country policies and economic and financial developments through a process called surveillance
• Provide member countries with finance to correct balance of payments problems

Question 6

What is a non-governmental organisation (NGO)?

Answer 6

An NGO is any non-profit, voluntary citizens group which is organised on a local, national or international level. They are independent of the government and are usually funded by donations

Question 7

What is an external shock?

Answer 7

External shocks are unexpected events that can have a significant impact on the economy or the global economy. Shocks can either be positive or negative

Question 8

What are shock absorbers?

Answer 8

Shock absorbers can reduce the impact of an external shock either automatically eg. by a floating exchange rate changing automatically or through government policy