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
