Globalisation

Question 1

What is Globalisation?

Answer 1

Increased integration of different economies around the world

Question 2

What are the key charteristics of globalisation?

Answer 2

1) Increased international movment of labour
2) Increased international movement of financial capital
3) Increased specialisation.
4) Increased international trade.
5) Increased trade to GDP ratio

Question 3

What is meant by FDI?

Answer 3

An investment made by a firm in one country into a firm in another country, to gain ownershipover the foreign firm.

Question 4

The definition of: Transnational Corporation

Answer 4

A company that operates in two or more countries.

Question 5

What are the causes of globalisation?

Answer 5

1) Improvement in transport (allows movment of people)
2) Improvement of IT (for financial capital)
3) Improvements in shipping such as containerisation
4) Trade liberalisation

Question 6

What is a trade barrier?

Answer 6

A restraint placed by a country on the importof a foreign good. The most common example of a trade barrier is a tariffwhich is a tax you have to pay when you import a good.

Question 7

Definition of: Containerisation

Answer 7

An efficient and relatively low cost system of transport that uses a common size of steel container to transport goods.

Question 8

Definition of: Trade Liberalisation

Answer 8

The reduction and removal of trade barriers.

Question 9

Explain one benefit and one cost of globalisation for indidual counties

Answer 9

+ The theory of comparative advantage states that specialisation according to comparative advantage will increase global output. Globalisation has led to an increase in specialisation and a corresponding increase in global output. The increase in global output has generally increased living standards.

• Specialisation has led to overdependence but this is a disadvantage and has had a negative impact on living standards.

Question 10

Explain one benefit and one cost of globalisation for goverments.

Answer 10

One benefit of globalisation is an increase in tas for governments.
One disadvantage of globalisation is a big increase in transfer pricing, where profit is moved to places with lower corporation tax.

Question 11

Explain one benefit and one cost of globalisation for goverments.

Answer 11

+ A reduction in costs through relocation.
- Trans-national (TNCs) create high barriers to market entry.
The purchasing economies of scale will reduce long run average costs as output increases.

Question 12

What is meant by transfer pricing?

Answer 12

A method whereby TNCs reduce the amount of corporation tax that they pay by shifting their profits into countries with low tax rates. However, it is an example of tax evasion and it is sneaky!

Question 13

Explain one benefit and one cost of globalisation for consumers.

Answer 13

+ Is wider choiceand lower pricesfor consumers. An increase in aggregate supply will reduce the price level as shown below
- If consumers become more driven to own more stuff then there is likely to be a decrease in happiness

Question 14

Explain one benefit and one cost of globalisation for workers.

Answer 14

+ More international oppunityfor workers.
- An increase in structural unemployment- as the structure of the economy changes. Globalisation has led to a decline in manufacturing in many developed countries and so many workers in these manufacturing industries have lost their jobs.

Question 15

Explain one benefit and one cost of globalisation for environment.

Answer 15

+ Increase in global cooperation to fight climate change. -Increase in global emissions through increase transportation

Question 16

What is the correct formula for trade-to-GDP ratios?

Answer 16

(Total value of trade/GDP) x 100