Theme 4 Textbook Flashcards
Define globalisation
A proccess by which the world’s economies become more closely inegrated
Define foreign direct investment (FDI)
Investment undertaken in one country by companies based in other countries
2 main reasons for foreign direct investment (FDI)
- Companies may want to sell their products to a particular market - market seeking
- Companies can take advantage of key resources - e.g oil or cheap unskilled labour - resource seeking
Define transnational company
A company whose production activity are carried out in multiple countries
Define World Trade Organization (WTO)
A multilateral body responsible for overseeing the conduct of international trade
Factors contributing to globalisation
- Communication costs - growth of internet and e-commerce allows instant communication
- Reduction of trade barriers - free trade areas and customs union e.g. European Union
- Migration - formation of Single European Market enabled freer movement of labour supply across EU
Impact of globalisation on individual countries and governments
- Oil prices - significant importance to many businesses as an energy source
- Political factors - 2022 conflict in Ukraine led to Western economies imposing sanctions on Russia - led to realignment of oil trade patterns
Impact of globalisation on producers
- Producers e.g. manufacturing sector
- Unable to compete with lower-cost producers
Define absolute advantage
The ability to produce a good more efficiently
Define comparative advantage
The ability to produce a good relatively more efficiently
Define terms of trade
The ratio of the index of export prices to the index of import prices
