The Global Economy Flashcards
What is a developed country?
Countries that are richer and more industrialised. They have higher GDP per capita figures
What is a developing country?
Countries that largely rely on manufacturing, agriculture and other labour intensive industries. They will have low GDP per capita and lower standards of living.
What is globalisation?
Increasing integration of economies internationally
What are the main characteristics of globalisation?
- Free movement of capital and labour across international boundaries
- Free trade in goods and services between different countries
- The availability of technological and intellectual capital to be used and patented on an international scale
What is a multinational corporation(MNC)?
Firms that operate in at least one other country aside from their country of origin
What are the factors that attract MNC’s to invest in a country?
- The availability of cheap labour and raw materials
- Good transport links
- Access to different markets
- Pro-foreign investment government policies
What are the causes of globalisation?
Trade Liberalisation- Reduction or removal of tariffs
- Increase in global product standards
- Improvements in communication technology
- Firms expanding overseas to exploit economies of scale
What are the benefits of globalisation?
- Encourages specialisation for countries to produce goods they are the best at producing, which increases output
- Producers can benefit from economies of scale and lower production costs
- Greater choice of goods for consumers
- Increase in world GDP
- Increased growth and employment
- Increased competition
What are the drawbacks of globalisation?
- Increase in price of some goods and services
- Economic dependency
- Global imbalances in balance of payment accounts
What are the positives of MNC’s?
- New jobs and wealth to an economy
- Inflows of foreign currency
- They can be more efficient by benefitting from economies of scale
- Raise living standards by providing employment
What are the negative effects of MNC’s?
- Exploitation of workers by paying lower wages
- Force local firms out of business
- Can relocate rapidly and cause mass unemployment
- Use economic power to reduce choice and increase prices
What are the consequences of globalisation on developing/emerging countries?
- Profits made by MNC’s return to their county of origin and don’t stay in the host country, which may increase inequality
- Skilled worker leave developing countries for more developed countries, reducing the potential for growth in the developing country
- Local companies may not be able to compete with MNC’s
