Unit 1 - Business Activity and Influences on Business (Businesses and the international economy)

Question 1

Globalisation

Answer 1

The free movement of goods, services, people, capital, information and technology, enabling businesses to sell their products anywhere in the world.

Question 2

Movement across international borders

Answer 2

• People
• Money
• Money
• Money

Question 3

Benefits of globalisation

Answer 3

• Increased markets
• Access to cheaper labour and raw materials
• Specialisation
• Increased levels of efficiency
• Knowledge, skills and technology
• Inward investment

Question 4

Drawbacks of globalisation

Answer 4

• International competitors with cheaper costs.
• New competitors
• Threat of takeover
• Power of multinational brands
• Whole industry closures
• Effects of events

Question 5

Multinational companies (MNCs)

Answer 5

• MNCs produce goods and services in more than one country and sell them in many countries.
• Global demand for MNC products is high they can produce and sell them at low prices.

Question 6

Exchange rates

Answer 6

Most countries have their own currencies. The exchange rate is the amount of one currency that can be brought with another currency.
- Big effect on selling and buying goods internationally.
- Exports are goods and services produced by a business in one country and sold in a different one.
- Imports are goods and services purchased from overseas by consumers and businesses.

Question 7

Strong dollar

Answer 7

Good:
- For consumers, prices of imports will decrease.
- if a business imports, buy more of these raw materials for the same US converted price.

Bad:
- For a business, more expensive abroad.
- Local/smaller businesses, compete against cheaper imports.

Question 8

Weak dollar

Answer 8

Good:
- Exports, cheaper in the country the business sells to.
- Local businesses, compete better against more expensive imports.

Bad:
- Consumers, prices of imports will increase.
- Businesses, import raw materials, as costs will increase.

Question 9

Rise in exchange rate

Answer 9

If the exchange rate of the dollar rises against other countries (imports), imported goods become cheaper. However, businesses that export goods will find that countries will find it more expensive to buy US - made goods, so sales may fall.

Question 10

Fall in exchange rate

Answer 10

• Imports more expensive.
• Us exports will become cheaper , more competitive in the international market.

Question 11

Effect or exchange rate on business sales

Answer 11

• Fall in exchange rate is a benefit to a business that exports as they become relatively cheaper
• Rise in exchange rates, imports cheaper

Question 12

Effect of exchange rate on business profit

Answer 12

• Fall in exchange rate should increase profits.
• Price received in Dollars is the same for each product, selling greater numbers sales revenue rises increasing profits.