Unit 2 Outcome 1 - Chapter 7

Question 1

What is globalisation?

Answer 1

Globalisation is the unification of the world’s economies, including its various commercial and financial markets. This created a global market place for the trade of goods and services across national boundaries, and in fact it can be traced back to perhaps 2000 years ago. Furthermore it has both costs and benefits for different people and has a number of factors contributing to its emergence.

Question 2

Explain the following theory to explain the emergence and continuing growth of globalisation: Relaxation of government controls

Answer 2

Deregulation in most economies meant trade restrictions began to deteriorate and this allowed for business to run more efficiently. Not only that, it also meant many markets were now freer and determined by forces of supply and demand.

Question 3

What are some theories to explain the emergence and continuing growth of globalisation?

Answer 3

. Relaxation of government controls 
. Better transport and communications 
. New technology
. Mobility of investment 
. The promise of better material living standards for all

Question 4

Explain the following theory to explain the emergence and continuing growth of globalisation: New technology

Answer 4

. Technology has contributed significantly to improving businesses way of advertising and expansion through things such as computers and the internet.
. However, it has also meant even unskilled workers can be involved in modern production.
. Furthermore, new technology has also enabled electronic banking and further encouragement of international trade.

Question 5

Explain the following theory to explain the emergence and continuing growth of globalisation: Better transport and communications

Answer 5

Improved speed and economy in international transport and communications have meant that businesses are more aware of profit opportunities and able to move resources and production between countries.

Question 7

Explain the following theory to explain the emergence and continuing growth of globalisation: Mobility of investment

Answer 7

Although some natural and labour resources are difficult to move between countries, money capital or investment resources are not. Businesses can, therefore, become mobile multinationals.

Question 7

Explain the following theory to explain the emergence and continuing growth of globalisation: The promise of better material living standards for all

Answer 7

. This is because globalisation and the removal of tariff protection encourages countries
. to specialise in selected areas of production where they have a comparative cost advantage over other countries
. = improved efficiency,
. lowered prices and inflation,
. expands the volume of world trade between countries,
. raises GDP levels for those involved,
. increases employment opportunities,
. lifts incomes
. and ultimately, strengthens material living standards

Question 8

Explain the following Asian region importance in the global economy: economic growth has been faster in Asia

Answer 8

. This means there is a higher volume of goods and services being produced.
. Faster growth in GDP than that for population = more rapid rise in average household disposable income per person = greater purchasing power = higher living standards.

Question 9

Explain the following Asian region importance in the global economy: The growth of markets for goods and services

Answer 9

. The asian region has taken trade liberalisation to its full potential and has swept the worlds markets with the goods and services they have to offer.
. This has then leaded to a boost in export sales, production and incomes.

Question 10

Explain the following Asian region importance in the global economy: Attraction of global business and high levels of foreign investment (how they got where they are)

Answer 10

. Many Asian economies have made themselves more attractive to multinational businesses and foreign investors by adopting certain policies.
. This has lead to increased investment which grows the productive capacity of these economies.

Question 11

Explain the following Asian region importance in the global economy: Western economic crisis

Answer 11

Whilst many countries suffered during the global financial crisis, some Asian economies where actually able to escape the pain experiences deeply by the US, Japan and Europe. There is no doubt Asian economies have experienced severe economic conditions, but their ability to stay string during the most recent crisis allowed them to extend their relative dominance in the global economy.

Question 12

What is the impact of globalisation on another economy?

Answer 12

China

PROS:
. Many polices were introduced including the policy on open investment and the membership to the WTO
. Increase in volume of trade (due to so much money coming from abroad)
. helped increase China’s export income
. greatly boosting aggregate demand
. boosted level of national production or GDP
. Average income rose
. Improvements in education

CONS:
. Also leads to instability because the world is connected if one country slips its a domino effect (eg. GFC)
. They weren’t hit as hard as the US but their GDP dropped from 13 to 8% = rising unemployment, falling incomes and lower material living standards
. Income distribution - manufacturing doing well but agriculture is suffering
. growing income inequality and rural unemployment and poverty are still quite high
. extensive damage that has been inflicted on the natural environment

Question 13

What are the international responses to the opportunities and challenges associated with globalisation?

Answer 13

It has encouraged the existence of three important international institutions, being:
. The World Trade Organisation (WTO)
. The World Bank
. The International Monetary Fund (IMF)

Question 14

What is the World Trade Organisation?

Answer 14

The World Trade Organization (WTO) is an international institution set up to:
. encourage the expansion of global trade as a means of accelerating economic growth
. establish and enforce rules for the conduct of trade between member countries
. settle trade disputes between countries.

Question 15

What is The World Bank?

Answer 15

. It is an international financial institution set up to provide technical and financial help in the form of financial loans and grants to member nations.
. It was established in 1944 and now involves 184 countries.

Question 16

What is the International Monetary Fund?

Answer 16

The International Monetary Fund (IMF) is a global organisation that keeps an eye on the world’s financial system. It was set up in 1944 to
. help stabilise international exchange rates,
. promote economic development,
. provide technical assistance
. and act as a lender of last resort to governments with financial troubles.

Question 17

What are the reasons for the increased importance of the Asian region in the global economy?

Answer 17

. Economic growth has been faster in Asia
. The growth of markets for goods and services
. Attraction of global business and high levels of foreign investment
. Western economic crisis

Question 18

Outline the following theory which explains the expansion of business across national boundaries: Roles of information and communications technology

Answer 18

. Computers and programs such as email, social media, websites and also any phones or smart phones are counted as information and communications technology.
. They allow businesses to interact with consumers regardless or country. This facilitates business to business contact.

Question 19

Outline the following theory which explains the expansion of business across national boundaries: international division of labour

Answer 19

Some countries such as China, Bangladesh and India offer low labour costs. This encourages companies to set up manufacturing facilities.

Question 20

Outline the following theory which explains the expansion of business across national boundaries: Economies of scale

Answer 20

. Businesses were able to receive benefits of expanding output or production and reduction of price per unit as they make more.
. This is because of the benefits of buying in bulk and already covering overheads.

Question 21

Outline the following theory which explains the expansion of business across national boundaries: Deregulation of labour, product and financial markets

Answer 21

. Many governments are following the trend of reducing or removing controls or laws to encourage a more free market that sees the forces of demand and supply determine price for labour products and finance (eg. Removal of tariffs, trade agreements and alliances)

Question 22

What are the effects of globalisation on Australian Consumers?

Answer 22

. It lowered inflation, this meant prices for goods and services was lowered
. It raised our economic growth, this meant higher incomes + lower prices = increased purchasing power = increased material living standards
. Increased competition for firms also means they have to improve quality and be more cost efficient in to to keep costumers coming back
. Expansion of consumer choice
. Many claim it has lifted the importance of materialism
. Buying can occur with the click of a mouse

Question 23

What are the effects of globalisation on Labour markets?

Answer 23

. More deregulated
. Government has encouraged ways to make our wage system more internationally competitive
. Workers in competitive and efficient firms and industries have gained better incomes and career paths
. Many in uncompetitive parts of the economy are losing jobs due to it being cheaper to pay workers overseas (eg. Manufacturing)

Question 24

What are the effects of globalisation on Financial markets?

Answer 24

. Australian financial markets were deregulated and exposed to global pressures, competition and judgements about the success of the Australian economy in controlling inflation.
. In the foreign exchange market - dollar was ‘floated’ so that the exchange rate was decided by demand and supply
. Financial markets were increasingly affected by the movement of large amounts of money capital and investment, both in and out of Australia.
. Local interest rates (i.e. the cost of credit) have probably remained lower than would otherwise have been the case.

Question 25

What are the effects of globalisation on the Government?

Answer 25

. Must select its economic management policies more carefully (to ensure that these measures keep inflation down and government budgets in check)
. Decline in national sovereignty - due to foreign investors buying Australia’s assets

Question 26

What are the effects of globalisation on the environment?

Answer 26

Increased transportation of goods:
. Long distance travel = Planes = CO2 = greenhouse gases = global warming

Environmental effects from increased production of goods:
. Increased agricultural production in Australia = more use of chemical fertilisers and pesticides that poison soils
. Increased logging of native forests
. Increased water use for growing agricultural exports
. Growing more exports has required increased land clearing
. Mining permanently scars and pollutes the environment
. At the end of the day, everything produced and consumed becomes waste

Increased environmental accountability by some multinational firms:
. Many MVCs are trying to change their acts to have a good reputation and keep costumers
. Changes can be made due to fear of government, prosecution, bad reputation, bad publicity and backlash from shareholders

Question 27

What is the economic, social, environmental and ethical context of multinational/transnational corporations?

Answer 27

Economic: General Electrical
. Contribute to 0.03% of Americas GDP
. Total of 307,000 employees as of December 2013

Social:
. Main shareholder has a place on the board of directors
. They give us medical equipment

Environmental:
. Delivering Australia’s third largest wind farm (valued at $450 million)
. Ecomagination (strategy to enhance resource productivity and reduce environmental impact at a global scale)

Ethical:
. Regularly provides returns for shareholders
. Workers are of age and payed properly
. Ecomagination controls how workers are treated

Question 28

What are multinationals?

Answer 28

They are companies (which are sometimes called transnationals) that produce and distribute goods and services in a number of different countries around the world.

Question 29

What are some theories to explain the expansion of business across national boundaries?

Answer 29

. International division of labour
. Economies of scale
. The role of information and communications technology
. Deregulation of labour, product and financial markets

Question 29

What are the pros of globalisation?

Answer 29

. Companies have the opportunity to expand to other markets = more revenue
. Economies of scale can be achieved, meaning they can reduce production costs and therefore have more competitive prices too
. Companies can also reduce costs through having access to cheaper resources
. They can borrow from overseas sources and raise additional finances
. Growth should help community through local employment opportunities
. Prices should fall due to higher competition
. Quality of products should improve and innovation will be encouraged (to compete)
. Consumers are therefore given maximum choice
. Workers with skills have the opportunity to work and prosper in a global market
. Gives people jobs in other countries

Question 29

What are the cons of globalisation?

Answer 29

. Global competition leads to job losses in developed nations (eg. Manufacturing)
. Also leads to lower wages and poorer working conditions for workers in developed nations
. Also exploitation of these workers
. Leads to destruction of the environment in less developed countries
. MVC’s exercise excessive control over many governments
. Many nations lose control of their own industries/firms to foreign investment