Globalisation

Question 1

List out negative effects of globalisation

Answer 1

• Workers have few rights in some countries
• Child labor
• Affect local communities by not enforcing environmental protection

Question 2

Define outsourcing

Answer 2

Move labour or production to an area or country where costs are lower

Question 3

What are the main objectives of a government?

Answer 3

• Stable prices
• Low unemployment
• Economic growth
• Surplus on Balance of Payments

Question 4

Causes of inflation of price

Answer 4

• High demand for product - increase the price makes more profit
• Cost of producing the products are high so the business must increase the price to maintain profit

Question 5

What happens in a boom?

Answer 5

• Businesses produce more goods
• Businesses invest in more machinery
• Less money is spent by the Government on unemployment benefits
• More money is collected by the Government in income tax and VAT

Question 6

What happen in a recession

Answer 6

• Businesses cut back on production
• Some businesses may go bankrupt
• Individuals may lose their jobs
• More money is spent by the Govt on unemployment benefits
• Less money is collected by the Govt in income tax and VAT

Question 7

Define external cost

Answer 7

External costs are the costs to other people

Question 8

Define external benefits

Answer 8

benefits to people who are not involved in the business

Question 9

Factors that influence exchange rates

Answer 9

• Inflation: If inflation in the UK is lower than elsewhere, then UK exports will become more competitive and there will be an increase in demand for £s. Therefore the rate of £ will tend to increase.
• Interest Rates:If UK interest rates rise relative to elsewhere, it will become more attractive to deposit money in the UK, Therefore demand for Sterling will rise.
• Change in competitiveness
• Relative strength of other currencies
• Balance of Payments

Question 10

Benefits of multinational companies

Answer 10

• Normally a large number of jobs are provided as a result of it coming to the area.
• An injection into the local economy that it enters
• Provide training and education for employees.
• Pay tax in that country

Question 11

Drawbacks of multinational companies

Answer 11

• Often employ ‘home nation’ managers, meaning high wage jobs aren’t given to locals.
• Can afford to charge low prices as a large business, pushing smaller local competition out.
• Often so large that they can influence government’s decisions with regards to grants, tax and land.

Question 12

Define globalisation

Answer 12

process by which the world is becoming increasingly interconnected. We now communicate, trade, travel and share each other’s cultures more easily around the world.

Question 13

Describe the advantages given out by globalization

Answer 13

Start selling exports to other countries – opening up foreign markets - gain more profits
Open a factory/operations in other countries (become multinational)- labour in Asia
Import products from other countries to sell in your own country

Question 14

Describe the threats given out by globalization

Answer 14

• Increasing imports into home market from foreign competitors
• Increasing investment from multinationals to set up operations in home country
• Employees may leave business that cannot pay the same or more than international competitors

Question 15

Effects of a increase in interest rates(monetary policies)

Answer 15

• Loan payback more expensive
• This limits business expansion and reduces profits
• Demand falls as customers pay higher interest on loans
• Savings increase