Theme 4 Flashcards
What is the growth rate of the UK economy like compared to emerging economies?
- UK economy has grown at 2.25% a year for more than 200 years and income doubles every 30 years.
- growth of car production in China is greater than any other country as businesses rely on China for production.
- India also shows substantial % growth but is dwarfed by china.
- In 2030 USA is estimated to still have the biggest economy with china close behind.
- India will have overtaken Japan to become the 3rd largest economy.
- The UK remains one the worlds biggest economy but is falling behind china and India.
- Brazil, Indonesia, Mexico, turkey and nigeria are also emerging economies.
Describe the growing economic power of countries within Asia
- China has become a regional hub which has drawn supplies and therefore helped growth of surrounding countries such as Cambodia, Indonesia and Vietnam.
- Vietnam and Indonesia are important for Asia due to their huge populations - Vietnam (95mil) and Indonesia (256mil).
- Asian countries follow blueprint of china and take education seriously which allows them to improve production of higher value-added products which will ultimately improve their economies.
- The rise of china has changed the focal point of global trade, impacting not only trade of goods but also services including tourism, banking and insurance.
Describe the growing economic power of countries within Africa
- Since 2000, there has been improvement in the economies of sub-saharan Africa.
- Not at the level of china and India, but more impressive than Latin America and Eastern Europe.
- Africa have had growth rates of 5.5% per year since 2000 compared to 2.5% in the west.
- Reasons for this growth could be because just before the year 2000, Britain pushed for debt write-offs in Africa, improving the macro economic balance in the main countries.
- Also, the China induced commodity price boom in 2004/5 and 2014 boosted economies across Africa with Nigeria (oil), Ghana (cocoa) and Kenya (coffee) being home to these commodities.
- Improved governance could also be responsible with reduced wars and increased number of democracy’s in Ghana and Nigeria.
Describe the growing economic power of countries in other parts of the world
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What are the implications of economic growth for businesses?
+ Accelerator effect on capital investment (rising demand and output encourages investment in capital).
+ Positive impact on business confidence, to for example introduce a new product or relocate.
+ Technological innovation due to greater investment.
+ Increased tax revenues for government - used to fund more spending on government services.
- Risks of higher inflation and higher interest rates.
- Inequality of growth of business could cause oligopoly.
How does economic growth increase trade opportunities for businesses?
- Increased profits from trade due to greater demand for goods and services as consumer confidence improves.
- Rise in living standards means customers have greater confidence in purchasing high end goods.
- Increased capital investment can allow for technological innovation improving output and efficiency resulting in greater revenue from trade.
How does economic growth change employment patterns?
- In the early stages of economic development, the key cause of growth is the switch from primary to secondary industries. Working in factories always generates more money than working the land. When this process slows, economic growth is harder to achieve.
- In order to achieve further growth there needs to be a shift towards tertiary and quaternary sectors where jobs are highly skilled and earn high incomes.
What are 4 indicators of growth?
- Gross domestic product (GDP).
- Literacy rates
- Health
- Human development index (HDI).
What is GDP?
- Gross domestic product is the value of all the goods and services produced in a country in the course of a year.
- economic growth is usually measured as the % change in this figure form one year to the next.
What are literacy rates?
- literacy rates are the % of people who are able to read and write.
- High levels of illiteracy may prove unsustainable for future economic development.
what are health indicators?
- Health indicators measure the health of a population through life expectancy, infant mortality and other factors.
- Government spending on healthcare has a direct impact on health.
what is the HDI?
- The human development index was created to find a single measure of healthy economic growth.
- The HDI is a single figure reflecting health, education and economic progress. It combines 3 pieces of data:
- gross national income per capita (PPP).
- life expectancy at birth.
- average years of schooling and expected years of schooling.
What are exports and imports?
- Exports are goods or services produced domestically and consumed abroad.
- Imports are goods or services which are produced abroad and then consumed domestically.
How does international trade and business growth impact exports and imports?
- International trade has impacted the types of imports and exports of countries, for example Britain no longer produce goods such as shoes as they can rely on cheaper imports, meaning they import these products from exporting countries.
- Business growth has also increased imports and exports as economies of scale allows bulk buying imports of materials from exporting countries.
- International trade also increases business growth as businesses are able to tap into new markets via exporting abroad.
what is business specialisation?
- Business specialisation is a method of production where a business focuses on the production of a limited range of products or services to gain greater productive efficiency within the overall business.
- In some cases a company may choose to only produce 1 product e.g. Coca Cola.
- Taylor’s scientific management supports business specialisation as his view is that everything should be broken down into smaller component tasks.
what is competitive advantage?
- a condition or circumstance that puts a company in a favourable and superior business position.
what is the link between business specialisation and competitive advantage?
- Business specialisation allows the business to focus on a limited range of products.
- The business will become more efficient when their output from the same raw materials increases.
- Firms that produce a wide range of products may need lots of different machines, when some machines are vacant due to low demand, capacity utilisation dips and therefore efficiency reduces.
- This can provide a competitive advantage through lower costs per unit which will increase profit margins and put the company in a superior position to competitors.
how does international trade and business growth impact business specialisation and competitive advantage?
- International trade can allow a company to specialise on a limited range of products and still grow their profits through tapping into foreign markets.
- Business growth can impact business specialisation as increased number of large businesses can increase competition, therefore it is more important to gain a competitive advantage which can be achieved through business specialisation.
How does international trade and business growth impact FDI
- International trade has increased FDI as the most obvious way to supply an overseas market is through exporting which will allow a business to reach a wider market.
- Business growth has caused FDI to increase because as the domestic market becomes saturated it is harder to gain a competitive advantage, meaning businesses will aim to look to invest in untapped foreign markets.
8 factors contributing to increased globalisation?
- International trade barriers/trade liberalisation
- Political change
- Reduced cost of transport and communication
- increased significance of TNCs
- Increased investment flows (FDI)
- Migration (within and between economies)
- Growth of the global labour force
- Structural change
how does international trade barriers/trade liberalisation increase globalisation?
- Restrictions are removed improving market access meaning more countries willing to trade with each other.
- Will reduce domestic production and increase reliance on imports from abroad.
- Results in extra competition from across the globe.
how does political change lead to increased globalisation?
- Government policy decides whether a country may focus on production for domestic or global consumption meaning a change from communism to capitalism will encourage globalisation e.g. communism in China.
- Political change through memberships of ego’s such as the WTO improves access to global markets and increases integration.
how does reduced cost of transport and communication increase globalisation?
- Reduced transport costs due to technological advances and more efficient methods of transport (containerisation) have encouraged global trade as transport is less likely to cancel out gains from comparative advantage.
- The growth of the internet has increased e-commerce which provides cheap marketing with global reach, enabling firms of all sizes to compete more easily in global markets.
how does increased significance of TNCs increase globalisation?
- TNCs epitomise global interdependence, as they often span across a number of different countries, with sales, profits and a flow of production being reliant on several countries at once.