3-Globalisation

Question 1

Which two Asian countries have become leading economies thanks to globalisation?

Answer 1

India and China

Question 2

How has the UK’s economy changed since the advent of globalisation?

Answer 2

It has shifted from producing goods to offering services

Question 3

What is free trade?

Answer 3

This occurs when countries trade with no protectionist measures such as tariffs, quotas and red tape

Question 4

Why have developing countries gained an advantage in the production of manufactured goods?

Answer 4

These countries have fewer regulation and lower labour costs, meaning it is cheaper to produce goods there, hence lower prices

Question 5

Define absolute advantage

Answer 5

This is when country A can produce more units of output than country B with the same factor inputs

Question 6

Define comparative advantage

Answer 6

This is when country A can produce the same units of output than country B but with a lower opportunity cost

Question 7

List a few advantages of specialisation globally

Answer 7

1. Greater world output
2. Higher standard of living for developing economies
3. Increased supply of goods to choose from

Question 8

List a few advantages of free trade

Answer 8

1. Greater economic growth
2. Greater efficiency due to competitive markets

3.Exploit economies of scale, which brings lower costs and therefore lower prices

Question 9

What is Foreign Direct Investment?

Answer 9

An investment made by a company or individual from one country into business interests located in another country

Question 10

Why is FDI good for a developing economy?

Answer 10

It creates jobs and encourages investment in technology

Question 11

What is trade creation?

Answer 11

When a country consumes more imports as import prices fall due to a removal of trade barriers

Question 12

What happens to countries that aren’t a member of a specific trading bloc?

Answer 12

They will face tariffs and other protectionist measures when trying to trade with members of a trading bloc

Question 13

How do tariffs affect imports?

Answer 13

They reduce imports, because the price of imports become more expensive due to the introduction of a tax

Question 14

What is a quota?

Answer 14

A limit on the quantity of imports allowed into a country

Question 15

How do quotas affect consumer surplus?

Answer 15

They reduce consumer surplus, because the price of these imports increase given a restriction on their output

Question 16

What are voluntary export restraints?

Answer 16

This is an agreement between two countries to limit the amount of goods they export to each other

Question 17

Why does protectionism usually lead to higher prices?

Answer 17

Protectionist measures distort the market and reduce competition, so domestic firms have no incentive to cut costs and reduce prices

Question 18

Why are tariffs considered regressive?

Answer 18

They impact low-income families the most

Question 19

What does the G20 comprise of?

Answer 19

The 20 largest economies in the world

Question 20

What is the role of the World Trade Organisation (WTO)?

Answer 20

To promote free trade

Question 21

What is the role of the world bank and IMF?

Answer 21

To ensure financial and economic stability

Question 22

What is the difference between the world bank and the IMF?

Answer 22

The World Bank can loan funds to member countries in order to reduce poverty and promote economic stability, whereas the IMF promotes monetary cooperation between member nations

Question 23

What is a bilateral trade agreement?

Answer 23

An agreement between two countries to favour each others’ goods and services

Question 24

What is the Eurozone an example of?

Answer 24

A monetary union

Question 25

What does being a member of a monetary union entail?

Answer 25

All members share the same currency and follow the same monetary policies

Question 26

List a few advantages of a monetary union

Answer 26

1. Currency is less prone to speculative shocks, reducing uncertainty 2. Less red tape when travelling between member countries, thus increasing efficiency

Question 27

What is the major disadvantage of being part of a monetary union

Answer 27

Members have to follow the same policies, so in times of economic distress they can't alter them at the expense of other member countries

Question 28

Which year did China become the world's second largest economy?

Answer 28

2011

Question 29

What factors contributed to China's growth in the 1990's?

Answer 29

Mass privatisation (which increased productivity) and the increase in Foreign Direct Investment

Question 30

How do you calculate GDP per capita

Answer 30

National income (GDP) ÷ population

Question 31

How do you calculate Real National Output (GDP)

Answer 31

Nominal National Output / (price index ÷ 100)

Question 32

How do you calculate percentage change

Answer 32

(Change/original) × 100

Question 33

What are index numbers used for

Answer 33

Used to make comparisons over time

Question 34

Problems with using index numbers

Answer 34

1. Choosing an appropriate/the right base year 2. Misuse and misrepresentation, because of the above 3. Difficulty with international comparisons

Question 35

Opportunities for firms during economic growth

Answer 35

1. Opens up new markets 2. Access to raw materials 3. Greater investment opportunities 4. Increased trade 5. Opportunities for cheaper production 6. Increased profits

Question 36

What is balance of payments

Answer 36

Exports minus imports

Question 37

What is trade creation?

Answer 37

Moving from a high cost producer to a low cost producer

Question 38

What is a trade deficit?

Answer 38

A country imports more than it exports, can lead to a weaker country

Question 39

What is globalisation?

Answer 39

The process of greater integration and interconnectedness between countries

Question 40

What are the usual features of globalisation?

Answer 40

1. Free movement of goods and services 2. Free movement of labour 3. Free movement of capital 4. Increased cultural exchange

Question 41

What is trade liberalisation?

Answer 41

Reduction of international trade barriers

Question 42

Name 3 trade barriers

Answer 42

1. Tariffs 2. Regulations 3. Quotas

Question 43

Factors leading to increased globalisation

Answer 43

1. Political change 2. WTO 3. Reduced cost of transportation and communication 4. Increased significance of TNCs 5. Increased FDI

Question 44

What does WTO

Answer 44

Has assisted in the reduction of trade barriers

Question 45

Factors leading to decreased transport prices

Answer 45

1. Fuel efficiency 2. Better logistics (better software reduces delays and saves time/fuel) 3. Automation (self service) 4. Trade agreements 5. Economies of scale 6. Deregulation

Question 46

Factors leading to decreased communication prices

Answer 46

1. Internet and smart phones made communication virtually free via apps) 2. Digitalisation (cheaper and more efficient)(text) 3. Global infrastructure (satellites, under sea cables) 4. Deregulation (increase competition, reduction in prices) 5. Cheaper equipment makes access more affordable

Question 47

Drawbacks of globalisation

Answer 47

1. Inequality 2. Inflation 3. Vulnerability to external economic shocks 4. Environmental issues 5. Unemployment 6. Standardisation - loss of culture 7. Dominant global brands

Question 48

What is glocalisation?

Answer 48

The adaptation of global products or services to local markets

Question 49

What is specialisation?

Answer 49

Occurs when economic units such as individuals, business, regions, or countries concentrate on producing specific goods or services.

Question 50

Why specialisation increases output?

Answer 50

1. Each economic unit can specialise in what they are best 2. Efficient use of time as there is no switching between tasks 3. Technical economies of scale as capital equipment used

Question 51

Advantages of specialisation

Answer 51

1. Increased output 2. Wider range of goods and services 3. Increased productivity (better use of workers) 4. Increased quality

Question 52

Disadvantages of specialisation

Answer 52

1. Finite resources 2. Changes in fashion 3. De-industrialisation 4. National interdependence

Question 53

Advantages of division of labour

Answer 53

1. Workers highly productive (increased wages, time saving, decreased costs, increased profitability) 2. Specialist capital for workers 3. Decrease prices, increase quality, increase quantity/choice

Question 54

Disadvantages of division of labour

Answer 54

1. Demotivation of workers (decrease productivity) 2. High worker turnover 3. Risk of long-term unemployment 4. Highly standardised goods/services

Question 55

What is Foreign Direct Investment (FDI)

Answer 55

Investment made by a business or other entity from one country into the production capacity of a business or other entity from another country (investment into productive assets)

Question 56

Drawbacks of FDI

Answer 56

1. MNCs may take advantage of weak environmental laws 2. Poor working conditions of MNCs in foreign factories 3. Profit goes to host nation of company - outflow

Question 57

What is a tradeable pollution permit

Answer 57

A market based way to reduce pollution while giving firms flexibility in how they comply. Companies have a cap on the amount of pollution they can produce. Firms can sell and buy permits that allow them to emit a certain amount of pollution.

Question 58

Advantages of tradeable pollution permits

Answer 58

1. Firms that don't pollute can sell permits 2. Guarantees a maximum level of pollution 3. If permits are auctioned governments can earn money

Question 59

Disadvantages of tradeable pollution permits

Answer 59

1. If too many are issued, prices fall and pollution doesn't decrease much 2. Some areas still might face high pollution if firms concentrate emissions 3. Requires monitoring 4. Risks of firms hoarding or speculating

Question 60

What is division of labour?

Answer 60

When workers are assigned specific tasks to do in the work place

Question 61

Specialisation evaluation

Answer 61

Depends on: Infrastructure Ability to adapt Education and skills