Th4.1: Impacts of Globalisation on Economic Growth

Question 1

What are the five impacts of globalisation on economic growth?

Answer 1

increased investment
world class management techniques and technology
increased output
political instability
comparative cost advantages will change over time

Question 2

Increased investment

Answer 2

globalisation increases investment within countries - the investment of TNCs represents an injection into the economy and will have a larger impact due to the multiplier. it creates an incentive for countries to make supply-side improvements to encourage TNCs to operate in their countries

Question 3

World class management techniques and technology

Answer 3

TNCs may bring world class management techniques and technology which can have knock on benefits to all industries as these techniques and technologies are available for them too

Question 4

Increased output

Answer 4

trade will increase output since it allows explotation of comparative advantage

Question 5

Political instability

Answer 5

however, the power of TNCs can cause political instability as they may support regimes which are unpopular and undemocratic but that benefit them or could hinder regimes which don’t support them

Question 6

Comparative cost advantages will change over time

Answer 6

comparative cost advantages will change over time and so companies may leave the country when it no longer offers an advantage which will cause structural unemployment and reduce growth