THEME 4 :SECTION 1 (GLOBALISATION) Flashcards
What are the 4 indicators of economic growth?
- GDP
- HDI
- Literary rate
- Health
Define GDP and GDP per capita
- 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.
Explain what HDI is and why it is criticised
- 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
What are the 8 factors linked to globalisation?
- Political change
- Migration
- Population changes
- Trade liberalisation
- FDI
- Transport and communication
- Economic development
- Global Companies
Explain what FDI is and its links to growth
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
Define a trading bloc
A bloc of countries that have agreed upon laws and rules that reduce or stop protectionist laws between them
What are the 3 key trading blocs?
- EU -European Union
- ASEAN - Association Of Southeast Asian Nation
- NAFTA- North American Free Trade Agreement
Define Globalisation
The increased trend for firms to become international rather than only domestic. Causing the world to become more interconnected through trade.
What are 2 reasons FDI occurs?
- It allows the business to gain information about foreign markets and consumers easier
- Helps to overcome trade barriers
Define emerging economies
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.
What variables are considered in HDI?
- life expectancy
- year/level of schooling
- standard of living (gross national income )
What are the characteristics of the NAFTA trading bloc?
- Includes Canada, Mexico and the US
- Free trade agreement
- no common tariff structure
What are the characteristics of the ASEAN trading bloc?
- Include 10 countries
- The most economically diverse
- Barriers to trade are kept to a minimum
- Free movement of labour and capital
What are the characteristics of the EU
trading bloc?
- A single market
- some common regulations
- harmonised standards outside of the block
- monetary union
- Free movement of capital and people
Drawbacks of using GDP to measure the size of an economy
- failure to account for income inequality
- failure to indicate whether the rate of growth is sustainable
Drawbacks of GDP per capita
- Hides extremes such as inequalities and poverty
- Doesn’t take the cost of living into account.
How does economic growth affect individuals?
- 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
How does economic growth affect businesses?
- 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
Define Specialisation and the possible drawbacks
- 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
What is protectionism and the pros and cons?
-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 gainsTypes of protectionist laws
- Tariffs = tax on imported goods
- Quotas = restriction on limitation on the good or how much can be imported
- domestic subsidies = government covering costs
- legislation
Link between specialisation and competitive advantage
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.
What is FDI and why it takes place
-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
Pros and cons of FDI
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
What impacts do trading blocs have?
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
Pros and Cons of FDI or international trade with EMERGING ECONOMIES
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
