6.1 Globalisation

Question 1

Globalisation definition

Answer 1

Process in which national economies have become increasingly integrated and interdependent

Question 2

What are the causes of globalisation

Answer 2

• trade blocs
• growth of MNCs
• technological advancements
• increase in communication
• improvements in transport
• containerisation

Question 3

What are the main characteristics of globalisation?

Answer 3

• greater trade in goods and services
• higher levels of labour immigration
• increased transfer of capital between countries through FDI and portfolio investment
• greater use of offshoring
• spread of ideas and technologies
• global shift

Question 4

Offshoring definition

Answer 4

When a firm hires another firm to perform part of their production in another country

Question 5

Consequences of globalisation for more developed countries

Answer 5

• outsource of production to low-cost countries = structural unemployment
• need to diversify away from manufacturing as less developed economies build up their absolute + comparative advantage in this sector
• fall in wage rate as firms can recruit individuals from overseas (migrate for work) at a lower cost

Question 6

Benefits of globalisation for more developed countries

Answer 6

• potential for higher sales and output by targeting products at fast-growing less developed economies
• economies of scale may be achieved by producing on a global scale
• increased competitiveness from foreign (lower priced) firms = lower prices
• brain drain = more skilled individuals moving in

Question 7

Consequences of globalisation for less developed countries

Answer 7

• brain drain
• exploitation of workers
• having to adopt free market macroeconomic policies in order to attract FDI
• failure of local businesses as foreign competitors move in
• environmental damage
• profits taken back to home country = withdrawal

Question 8

Benefits of globalisation for less developed countries

Answer 8

• more employment due to cheap labour
• development as jobs may give certain benefits e.g health insurance ect.
• economic growth = taxing on the large firms that have moved in e.g corporation tax
• sharing in ideas allow for certain mistakes made by previous developing economies to be prevented

Question 9

MNC definition

Answer 9

Businesses that operate in at least two countries

Question 10

Benefits of MNCs to economies

Answer 10

• employment
• wages
• tax revenues
• new products

Question 11

Drawbacks of MNCs to economies

Answer 11

• low wages
• exploitation of resources and workers
• environmental damage
• profits transferred back to home country
• lower prices goods = failure in local businesses