Week 2 - Globalisation and some theme 1 Flashcards
Define globalization
A process by which economies and cultures have been drawn deeper together and have become more interconnected through global networks of trade, capital flows, and the rapid spread of technology and media.
What is the key benefit of globalization?
Allows businesses to specialise in producing goods and services where they have comparative advantage = gain in economic welfare e.g. lower prices and more choice
for consumers
Give three characteristics of globalization
- Trade to GDP ratios are
increasing for many countries - Expansion of financial capital
flows across international
borders - Increasing foreign direct
investment and cross border
acquisitions - More global brands –
including a rising number
from emerging countries - Deeper specialization of
labour e.g. in making specific
component parts - Global supply chains & new
trade and investment routes - Higher levels of cross-border
labour migration - Increasing connectivity of
people and businesses
through networks
Give 3 causes of globalization
Containerisation, Technological advances, Differences in tax systems, Less protectionism
Define Transnational corporations
Base their manufacturing, assembly, research, and retail operations in several
countries.
Give 1 example of a TNC
Nike, Facebook, Apple, Netflix, Uber,
Amazon, Google, and Samsung.
Why are TNC’s key driver of globalisation?
Because they have been re-locating manufacturing to countries with relatively
lower unit labour costs to increase profits and dividends for their shareholders. F
Give two advantages of globalization
- Leads to deeper division of labour
in global supply chains and harnessing economies of scale – leading to gains in economic welfare. - More competitive markets through trade reduces the level of monopoly supernormal profits and can
incentivize businesses to seek cost-reducing innovations. - There are advantages from the freer movement of labour between countries including relieving labour
shortages and promoting the sharing of ideas from diverse workforces. - Trade can help drive faster economic growth which leads to higher per capita incomes. This has reduced the
extent of extreme poverty in the world economy. Less than one person in ten lives on less than $1.90 a day
Give 2 drawbacks of globalization
- Rising inequality / relative poverty
- Threats to the global commons
- greater exploitation of the environment
- Workers in may suffer structural unemployment as a direct result of the outsourcing of manufacturing to
lower-cost countries and a rise in the share of imports in a nation’s GDP.
Give 2 arguments that UK has benefited from globalization
Expanded choice and higher consumer surplus.
- Impact of inward investment into UK on employment and growth.
What is an external shock
External shocks are events that come from outside a domestic economic system
Give an example of a negative external shock
such as the financial crisis and the pandemic create much instability and can lead to
persistent periods of weaker economic growth, higher unemployment, falling real incomes and rising poverty.
Give an example of a positive external shock
the emergence of, and widespread adoption of technologies used by
businesses and households in many countries
What are the four factors of production?
Land, labour, capital and enterprise
Define land
The natural factor resources available for production
What do entrepreneurs do?
Organise factors of production and take risks
What is labour?
The quantity and quality of all human inputs into the production process
What is capital?
Man-made goods used to supply other products such as technology (hardware, factories, plant and software.
What are capital goods?
Goods used to make other consumer goods and services.
What is a free good?
Has zero opportunity cost in its supply
What are non-renewable resources?
They are finite in supply - with fossil fuels, no mechanisms exist to replenish them.
What are non-renewable resources?
They are replaceable produced the rate of extraction is less than the natural rate at which a renewable resource regenerates e.g. solar energy, tidal power.
Define positive statements
Objective statements that can be tested by referring to evidence.
Define normative statements
Subjective statements - they carry one or more value judgements about what ought to be
Define opportunity cost
The cost of a choice measured by the nest best alternative foregone or sacrificed.
What does a PPF show?
Shows the maximum potential output combinations of two products an economy can achieve when all its resources are fully and efficiently employed.
