Week 2 - Globalisation and some theme 1

Question 1

Define globalization

Answer 1

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.

Question 2

What is the key benefit of globalization?

Answer 2

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

Question 3

Give three characteristics of globalization

Answer 3

1. Trade to GDP ratios are
   increasing for many countries
2. Expansion of financial capital
   flows across international
   borders
3. Increasing foreign direct
   investment and cross border
   acquisitions
4. More global brands –
   including a rising number
   from emerging countries
5. Deeper specialization of
   labour e.g. in making specific
   component parts
6. Global supply chains & new
   trade and investment routes
7. Higher levels of cross-border
   labour migration
8. Increasing connectivity of
   people and businesses
   through networks

Question 4

Give 3 causes of globalization

Answer 4

Containerisation, Technological advances, Differences in tax systems, Less protectionism

Question 5

Define Transnational corporations

Answer 5

Base their manufacturing, assembly, research, and retail operations in several
countries.

Question 6

Give 1 example of a TNC

Answer 6

Nike, Facebook, Apple, Netflix, Uber,
Amazon, Google, and Samsung.

Question 7

Why are TNC’s key driver of globalisation?

Answer 7

Because they have been re-locating manufacturing to countries with relatively
lower unit labour costs to increase profits and dividends for their shareholders. F

Question 8

Give two advantages of globalization

Answer 8

1. Leads to deeper division of labour
   in global supply chains and harnessing economies of scale – leading to gains in economic welfare.
2. More competitive markets through trade reduces the level of monopoly supernormal profits and can
   incentivize businesses to seek cost-reducing innovations.
3. There are advantages from the freer movement of labour between countries including relieving labour
   shortages and promoting the sharing of ideas from diverse workforces.
4. 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

Question 9

Give 2 drawbacks of globalization

Answer 9

1. Rising inequality / relative poverty
2. Threats to the global commons
3. greater exploitation of the environment
4. 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.

Question 10

Give 2 arguments that UK has benefited from globalization

Answer 10

Expanded choice and higher consumer surplus.

• Impact of inward investment into UK on employment and growth.

Question 11

What is an external shock

Answer 11

External shocks are events that come from outside a domestic economic system

Question 12

Give an example of a negative external shock

Answer 12

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.

Question 13

Give an example of a positive external shock

Answer 13

the emergence of, and widespread adoption of technologies used by
businesses and households in many countries

Question 14

What are the four factors of production?

Answer 14

Land, labour, capital and enterprise

Question 15

Define land

Answer 15

The natural factor resources available for production

Question 16

What do entrepreneurs do?

Answer 16

Organise factors of production and take risks

Question 17

What is labour?

Answer 17

The quantity and quality of all human inputs into the production process

Question 18

What is capital?

Answer 18

Man-made goods used to supply other products such as technology (hardware, factories, plant and software.

Question 19

What are capital goods?

Answer 19

Goods used to make other consumer goods and services.

Question 20

What is a free good?

Answer 20

Has zero opportunity cost in its supply

Question 21

What are non-renewable resources?

Answer 21

They are finite in supply - with fossil fuels, no mechanisms exist to replenish them.

Question 22

What are non-renewable resources?

Answer 22

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.

Question 23

Define positive statements

Answer 23

Objective statements that can be tested by referring to evidence.

Question 24

Define normative statements

Answer 24

Subjective statements - they carry one or more value judgements about what ought to be

Question 25

Define opportunity cost

Answer 25

The cost of a choice measured by the nest best alternative foregone or sacrificed.

Question 26

What does a PPF show?

Answer 26

Shows the maximum potential output combinations of two products an economy can achieve when all its resources are fully and efficiently employed.