The global economy Flashcards

1
Q

What is globalisation

A

growing interconnection of the world’s economies

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2
Q

causes of globalisation:

A

Fewer tariff and quota,reduced cost of transport,reduced cost of communication,increase significance of multinationals

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3
Q

the impact of globalisation:-
on individual countries:-

A

if a country is where MNC is based, it will have increase in economic growth,higher number of exports and better technology as MNC tend to go to more developed countries

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4
Q

impact of globalization on governments, :-

A

increased tax revenue, can be spent to improve public goods

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5
Q

the impact of globalisation on producers

A

Reduced taxation,access to huge markets,lower costs, access to labour.

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6
Q

impact of globalization. on consumer

A

prices will be lower

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7
Q

impact of globalisation on workers

A

there will be new jobs

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8
Q

impact of globalisation on the environment

A

More environmental damage,such as polution as more factories are built

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9
Q

What are MNCs and what is FDI?

A

MNCS are firm with headquarters in one country and production facilities in others
FDI:-when a company makes an investment

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10
Q

○ What has led to the emergence of MNCs/FDI?

A

-economies of scale
-access to natural resources/cheap material
-lower transport and communication cost
-access to costumers in different regions:-MNC developed bc they can sell far more goods and service in global market than in domestic material

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11
Q

○ What are the advantages of MNCs / FDI?

A

-Job creation:-more factories,wherehouse etc
-investment in infrastructure:-bad infrastructure= no FDI investment on infastructure increase MNC and FDI
-developing skills:-MNCs provide training & work experience for workers
-developing capital:-MNCs help boost stock of capital in host countries
-Contributing to taxes:- profit made by MNC are taxed by host nation.This increases tax revenue-government can use to spend on public goods

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12
Q

○ What are the disadvantages of MNCs / FDI?

A

-tax avoidance:-practice of trying to pay tax less in legal way
-Environmental damage:- MNC hare heavily involved in extraction industries in coal, oil,gold mining.
-moving profits abroad:-This means that profit are returned to country where MNC is based.Host country loses out

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13
Q

○ What are the reasons for protectionism?

A

-prevent dumping
-protecting employment
-protecting infant industries
-to gain tariff revenue
-preventing the entry of harmful or unwanted goods
-reduce current deficit
-retaliation:-take action against someone who has done something bad to you

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14
Q

What are the advantages of protectionism methods?

A

-1. Protects Domestic Industries
✅ Advantage: Protectionist policies help local businesses compete against cheaper foreign goods, preventing industries from collapsing due to intense competition.

  1. Safeguards Jobs
    ✅ Advantage: Limiting imports encourages local production, preserving jobs in manufacturing and other sectors that might otherwise be outsourced.
  2. Reduces Trade Deficit
    ✅ Advantage: By restricting imports and promoting local production, a country can improve its trade balance, reducing reliance on foreign goods.
  3. Encourages Economic Growth
    ✅ Advantage: Governments can use subsidies and support programs to help industries grow, leading to higher GDP and industrial development.
  4. Enhances National Security
    ✅ Advantage: Protectionism ensures that essential industries (e.g., defense, energy, and agriculture) are not overly dependent on foreign suppliers.
  5. Prevents Dumping
    ✅ Advantage: Countries can impose anti-dumping tariffs to stop foreign firms from selling goods at extremely low prices, which could destroy local businesses.
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15
Q

What are the disadvantages of protectionism methods?

A

-higher prices for consumers
-2. Less Variety of Goods
❌ Disadvantage: Import restrictions limit consumer choices, making it harder to access diverse products from global markets.

  1. Retaliation from Other Countries
    ❌ Disadvantage: Countries affected by protectionist policies may impose their own trade barriers, leading to trade wars that harm exports.
  2. Inefficiency and Lack of Innovation
    ❌ Disadvantage: Without foreign competition, local businesses might become inefficient, producing lower-quality goods at higher prices.
  3. Slower Economic Growth
    ❌ Disadvantage: Protectionism reduces international trade, which can slow down economic expansion and reduce investment opportunities.
  4. Hurts Exporting Industries
    ❌ Disadvantage: If other countries retaliate with their own tariffs, domestic businesses relying on exports may suffer losses.
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16
Q

Understand the effects of tariffs, quotas and subsidies using supply and demand diagrams

A

draw diagram

17
Q

○ How do trading blocs impact member countries?

A

✅ Advantages:

Increased Trade & Economic Growth – Reduced barriers lead to higher trade volumes and economic growth.
Lower Prices & More Choices – Consumers benefit from cheaper imports and a wider variety of goods.
Greater Investment Opportunities – Businesses access larger markets, encouraging foreign direct investment (FDI).
Stronger Political & Economic Ties – Members develop closer cooperation, increasing political stability.

❌ Disadvantages:

Loss of Sovereignty – Some policies must be aligned with bloc rules, limiting national decision-making.
Unequal Benefits – Larger or more developed countries within the bloc may gain more than smaller economies.
Increased Competition – Local businesses may struggle against stronger companies from member countries.

18
Q

○ How do trading blocs impact non-member countries?

A

they will face common trade barriers when selling goods to any member inside the bloc

19
Q

○ Give examples of trading blocs

A

-EU-27 countries
-NAFTA-3countries -USA,Canada,Mexico
-ASEAN-10 members
-SACU-formed in 1910,oldest

20
Q

○ Understand the role and actions of the WTO

A

-The World Trade Organization (WTO) is an international organization that regulates global trade and ensures smooth, predictable, and free trade between countries.

🔹 Roles of the WTO:

Trade Liberalization – Encourages the removal of tariffs, quotas, and trade barriers.
Dispute Resolution – Resolves trade conflicts between countries.
Negotiation Platform – Hosts trade talks (e.g., Doha Round) for global trade agreements.
Monitoring Trade Policies – Ensures countries follow fair trade rules.
Assisting Developing Nations – Provides support for economic growth through trade.
🔹 Actions of the WTO:

Settles disputes (e.g., U.S.-China trade conflicts).
Promotes fair competition by preventing unfair trade practices like dumping.
Encourages sustainable trade to protect the environment.

21
Q

the factors that affect the supply of currencies

A

-intrest rate in other countries
-currency speculators
-the Demand for imports
📉 Factors that Increase Supply of a Currency (Depreciation)
❌ High Inflation – Reduces the value of the currency.
❌ Lower Interest Rates – Investors seek better returns elsewhere.
❌ Trade Deficit – More imports mean selling local currency to buy foreign currency.
❌ Political Instability – Investors move money to safer currencies.

22
Q

○ Understand the patterns of developed and developing countries

23
Q

○ How to define exchange rates and the factors that affect the demand of currencies

A

An exchange rate is the price of one currency in terms of another

Factors that affect demand for a currency:-interest rate, currency speculators, the demand for exports

📈 Factors that Increase Demand for a Currency (Appreciation)
✔ Higher Interest Rates – Attracts foreign investment.
✔ Strong Economy – Investors prefer stable currencies.
✔ Trade Surplus – More exports mean higher demand for the currency.
✔ Foreign Investment Inflows – More demand for local currency.

24
Q

How to use supply and demand diagrams to show the determination of exchange rates

A

Draw diagram

25
Q

trading bloc

A

groups pop countries situated in the same region join together and enjoy trade free of Harris,qouats and other form of trade barrier