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Business Studies > THEME 4 :SECTION 1 (GLOBALISATION) > Flashcards

THEME 4 :SECTION 1 (GLOBALISATION) Flashcards

1
Q

What are the 4 indicators of economic growth?

A
  • GDP
  • HDI
  • Literary rate
  • Health
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2
Q

Define GDP and GDP per capita

A
  • GDP is a measure of the total value of all the goods and services in a country over a certain time period
  • GDP per capita = (per person) breaks down a country’s economic outputperperson and is calculated by dividing theGDPof a country by its population.
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3
Q

Explain what HDI is and why it is criticised

A
  • HDI = Health Development Index, used to measure a country’s overall achievement in its social and economic dimensions.
  • It fails to take into account poverty, inequality etc. Similarly to GDP
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4
Q

What are the 8 factors linked to globalisation?

A
  • Political change
  • Migration
  • Population changes
  • Trade liberalisation
  • FDI
  • Transport and communication
  • Economic development
  • Global Companies
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5
Q

Explain what FDI is and its links to growth

A

FDI= Foreign Direct Investment. an investment made by a firm or individual in one country into business interests located in another country through takeover or merger
- directly promotes economic growth by itself but also indirectly does so via its interaction terms

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6
Q

Define a trading bloc

A

A bloc of countries that have agreed upon laws and rules that reduce or stop protectionist laws between them

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7
Q

What are the 3 key trading blocs?

A
  • EU -European Union
  • ASEAN - Association Of Southeast Asian Nation
  • NAFTA- North American Free Trade Agreement
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8
Q

Define Globalisation

A

The increased trend for firms to become international rather than only domestic. Causing the world to become more interconnected through trade.

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9
Q

What are 2 reasons FDI occurs?

A
  • It allows the business to gain information about foreign markets and consumers easier
  • Helps to overcome trade barriers
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10
Q

Define emerging economies

A

The economy of a developing nation that is becoming more engaged with global markets as it grows. They’re growing fast but not fully developed.

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11
Q

What variables are considered in HDI?

A
  • life expectancy
  • year/level of schooling
  • standard of living (gross national income )
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12
Q

What are the characteristics of the NAFTA trading bloc?

A
  • Includes Canada, Mexico and the US
  • Free trade agreement
  • no common tariff structure
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13
Q

What are the characteristics of the ASEAN trading bloc?

A
  • Include 10 countries
  • The most economically diverse
  • Barriers to trade are kept to a minimum
  • Free movement of labour and capital
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14
Q

What are the characteristics of the EU

trading bloc?

A
  • A single market
  • some common regulations
  • harmonised standards outside of the block
  • monetary union
  • Free movement of capital and people
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15
Q

Drawbacks of using GDP to measure the size of an economy

A
  • failure to account for income inequality

- failure to indicate whether the rate of growth is sustainable

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16
Q

Drawbacks of GDP per capita

A
  • Hides extremes such as inequalities and poverty

- Doesn’t take the cost of living into account.

17
Q

How does economic growth affect individuals?

A
  • creates jobs, and average income rises
  • better government spending , meaning better infrastructure and health services and standards of living etc
  • However, can mean exploitation labour and environmental issues too
18
Q

How does economic growth affect businesses?

A
  • Increased demand from more disposable income
  • reduced costs from cheaper labour
  • However, it can also mean increased inflation and competition if other firms decide to join the market too
19
Q

Define Specialisation and the possible drawbacks

A
  • The focus on the production on a limited scope of goods in order to become more efficient in making it
    Drawback :
  • can be risky in dynamic markets or if economic changes are uncertain
20
Q

What is protectionism and the pros and cons?

A 
-The practise of shielding a country's domestic industries from foreign competition by taxing imports.
Pros: protect domestic firms 
        - created more gov rev
Cons: limits consumer choices 
         - only short term gains
21
Q

Types of protectionist laws

A
  • Tariffs = tax on imported goods
  • Quotas = restriction on limitation on the good or how much can be imported
  • domestic subsidies = government covering costs
  • legislation
22
Q

Link between specialisation and competitive advantage

A

Once specialization occurs, resulting in economies of scale, a company is able to reduce the price for its goods or services because it costs less to make their goods or provide their services. This provides a competitive advantage in the marketplace.

23
Q

What is FDI and why it takes place

A

-The taking of a controlling ownership in a company in one country outside of your own or expanding internationally

  • Reasons: Access to new international markets
  • Take advantage of skilled labour or use recourses only available in one country
  • Helps overcome international trade
    barriers
24
Q

Pros and cons of FDI

A

Pros: Fewer regulations, costs and competitors from the current market

  • Can help LEDC develop and create jobs
  • market data and workers from that market are transferred

Cons: disruption to domestic practices

  • foreign firm employees resisting
  • Foreign markets could be volatile which could lead to added costs or reshoring
25
Q

What impacts do trading blocs have?

A

PROS

  • fewer regulations if in bloc = easier to obtain material
  • more skilled workers
  • protection from international comp

CONS

  • increased costs of exports
  • small firms are forced out of the market
  • more costs as you change operations
26
Q

Pros and Cons of FDI or international trade with EMERGING ECONOMIES

A

Pros:

  • Possible economies of scale or new resources
  • specialist skills to take advantage of
  • growing incomes and less competition = increases profit

Cons:

  • the market may be volatile and lead to added costs or uncertainties (risky)
  • exploitation of labour = ethical issues and decreased demand if consumers find out
  • May use tax avoidance which can damage economies

Business Studies (22 decks)

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