Topic sheet questions international economics Flashcards
Define globalisation?
Increased interdependence of economies through trade
Give three examples of global companies?
Shell, BP and Amazon.
Identify three characteristics of globalisation?
- increased trade ( as a % of GDP)
- increased foreign direct investment.
- Increased migration or movement of people.
Identify three characteristics of deglobalisation?
- Increased trader barriers such as tariffs.
- Falling trade as a % of GDP.
- Less migration.
Identify three causes of globalisation?
- Lower transport and communication costs.
- increased importance of transnational corporations TNCS
- Lower trade barriers or trade liberalisation.
Explain how trade liberalisation increases globalisation?
When trade can take place with no restriction, this reduces the transaction costs of trading, when the cost of trading decreases more trade will occur. This has been seen with trading blocs such as EU, where the free movement of goods and services has increased the volume of trade amongst member countries.
Explain how reduced tranpsort and communication costs causes globalisation.
Transport and communication are a cost to production, so if these aspects of trade can be reduced then world supply can increase.
This means that it becomes more cost effective to import goods from further away rather than domestically which increases the chances of specialisation. It also means that production can be broken down so components can be made in various countries and transported to an assembly point.
Explain how TNCS cause globalisation?
TNCS have found that there are 3 reasons to expand internationally- this is search of resources.
Search to find new markets to sell products.
-In search of more efficient locations to produce.
Identify three benefits of globalisation?
Increased world output, through comparative advantage.
- Reduction in absolute poverty by giving countries access to inflows of money.
- Allowing of transfer and knowledge of technology.
- Improved quality and choices for consumers.
Identify three disadvantages of globalisation?
Externalities from transport and increased production .
- inequalities within and between countries.
- Vulnerability to external shocks.
- Structural unemployment
- Exploitation.
identify three benefits of FDI to the host country
- transfer of technology (capital) and knowledge and human capital
- Provides employment and income/boosts AD in the short run, and LRAS through investment.
- Provides tax revenue.
Identify three disadvantages of FDI to the host country, give examples.
- Exploitation of workers: low wage, poor working conditions.
- Bringing in overseas managers rather than employing local people.
- Environmental damage if the government ‘turn a blind eye’ to activities.
- May have been given tax incentives, so not contributing to tax revenue.
- May be footloose, so able to leave quickly without bestowing any benefits.
What are global supply chains and give an example?
When sequences in the production process can take place in different countries. For example, the raw materials for a pencil may be found in Canada and Zambia, the design of the pencil takes place in the UK, and the construction of the pencil takes place in China.
In your opinion does globalisation benefit the world?
- They have increased life expectancy
- They can increase efficiency in economies as they can specialise in what they are most efficient in and trade the surplus (also forces more competition).
- There have been improvements in the standards of living of LEDcs as they can be hosted.
In your opinion why is there public backlash to globalisation?
- Global warming, habitat destruction and resource depletion.
- inequality distribution of global wealth.
- Imperialism and cultures forced on nations.
- Individuals or firms may lose their jobs or be disadvantaged.
Define the theory of comparative advantage?
Countries should specialise in the products that they have the lowest opportunity cost in.
Define absolute advantage?
When a country can produce at a lower cost compared to another country.
Evaluate the benefits of specialisation
- Can become more efficient/productive as an economy.
- Can benefit from economies of scale.
- Can produce more and increase standards of living.
Evaluate the benefits of specialisation
- Can become more efficient/productive as an economy.
- Can benefit from economies of scale.
- Can produce more and increase standards of living.
What are the disadvantages of specialisation?
- Costs of transport may make it too expensive to trade with other countries.
- Makes you vulnerable if you are not producing strategic goods like food.
- You may get diseconomies of scale.
- if comparative advantage changes over time you must change the structure of your economy.
What are the disadvantages of specialisation?
- Costs of transport may make it too expensive to trade with other countries.
- Makes you vulnerable if you are not producing strategic goods like food.
- You may get diseconomies of scale.
- if comparative advantage changes over time you must change the structure of your economy.
Use comparative advantage to explain the benefits of globalisation and free trade.
Trade allows country to specialise in goods that they have a comparative advantage in. This means that world output can increase as they are producing what they are relatively efficient at.
Use comparative advantage to explain the benefits of globalisation and free trade.
- Trade allows countries to specialise in what they have the lowest opportunity cost in.
- This increases output as they can produce what they are relatively efficient in.
- This increases world output as output is greatest after specialisation.
- This increases standards of living as consumers have greater choice.
What assumptions does the theory of comparative advantage?
- does not take into account transport costs.
- Assumes no diseconomies of scale of diminishing returns.
- No externalities.
