The Global Economy

Question 1

What is the Global Economy?

Answer 1

The global economy is looking at the increasing intervention, I.e. coming together, of the world economy.

This process is sometimes referred to as globalisation, and increasingly, more and more businesses tend to operate on a global basis (multi-nationals)

Question 2

There’s 3 aspects to globalisation, what are they?

Answer 2

1) Increasing trade between countries
2) Increasing movement of people and money around the world
3) More and more businesses are tending to operate on a multi-national scale

Question 3

What is meant by ‘Increasing movement of people and money around the world’?

Answer 3

people:

• More international tourism, people are becoming aware/experiencing new cultures
• Increases in migration - More and more people are looking for jobs in other countries (Usually the movement from poor to rich countries)
• In terms of money, increasingly, people will be investing their money wherever they can get the highest rate of return

Question 4

What is meant by ‘More and more businesses are tending to operate on a multi-national scale’? (Why? What are the benefits?)

Answer 4

• Expanding faster in the long run, leading to more profit
• Economics of scale, helps reduce costs
• Risk-spreading - by selling to lots of different markets
• Operate where production costs are lower
• Tax - They will try to arrange to minimise tax on profit made

Question 5

What are the advantages of globalisation for consumers?

Answer 5

• We get more choice
• We can benefit from much lower prices (Due to specialisation/competition)
• More competition between businesses, therefore benefits consumers
• People have a lot more freedom on where they travel/work

Question 6

What are the advantages of globalisation for businesses?

Answer 6

• Spreads risk
• Grow faster - can benefit from economies of scale
• Make profits on a global scale

Question 7

What are the advantages of globalisation for the economy?

Answer 7

Should allow economies to grow quickly. This is because cheaper goods/lower prices means people have higher disposable incomes, and because of this they can afford to buy more, and the economy can grow quicker.

Question 8

What are the disadvantages of globalisation? (3)

Answer 8

1 - It increases competition that all countries have to face. This may mean traditional companies in industries may find it hard to compete, e.g. clothing in the UK. This may lead to an increase in structural unemployment

2 - It makes it harder for governments to control what goes on in their economy - because their so dependent/affected by what’s happening in other economies.

3 - Cultural grounds - Some people don’t like it, because they feel its undermining their traditional way of life, e.g. rather than eating local food, people are eating McDonalds instead.