THEME 4 :SECTION 1 (GLOBALISATION)

Question 1

What are the 4 indicators of economic growth?

Answer 1

• GDP
• HDI
• Literary rate
• Health

Question 2

Define GDP and GDP per capita

Answer 2

• GDP is a measure of the total value of all the goods and services in a country over a certain time period
• GDP per capita = (per person) breaks down a country’s economic outputperperson and is calculated by dividing theGDPof a country by its population.

Question 3

Explain what HDI is and why it is criticised

Answer 3

• HDI = Health Development Index, used to measure a country’s overall achievement in its social and economic dimensions.
• It fails to take into account poverty, inequality etc. Similarly to GDP

Question 4

What are the 8 factors linked to globalisation?

Answer 4

• Political change
• Migration
• Population changes
• Trade liberalisation
• FDI
• Transport and communication
• Economic development
• Global Companies

Question 5

Explain what FDI is and its links to growth

Answer 5

FDI= Foreign Direct Investment. an investment made by a firm or individual in one country into business interests located in another country through takeover or merger
- directly promotes economic growth by itself but also indirectly does so via its interaction terms

Question 6

Define a trading bloc

Answer 6

A bloc of countries that have agreed upon laws and rules that reduce or stop protectionist laws between them

Question 7

What are the 3 key trading blocs?

Answer 7

• EU -European Union
• ASEAN - Association Of Southeast Asian Nation
• NAFTA- North American Free Trade Agreement

Question 8

Define Globalisation

Answer 8

The increased trend for firms to become international rather than only domestic. Causing the world to become more interconnected through trade.

Question 9

What are 2 reasons FDI occurs?

Answer 9

• It allows the business to gain information about foreign markets and consumers easier
• Helps to overcome trade barriers

Question 10

Define emerging economies

Answer 10

The economy of a developing nation that is becoming more engaged with global markets as it grows. They’re growing fast but not fully developed.

Question 11

What variables are considered in HDI?

Answer 11

• life expectancy
• year/level of schooling
• standard of living (gross national income )

Question 12

What are the characteristics of the NAFTA trading bloc?

Answer 12

• Includes Canada, Mexico and the US
• Free trade agreement
• no common tariff structure

Question 13

What are the characteristics of the ASEAN trading bloc?

Answer 13

• Include 10 countries
• The most economically diverse
• Barriers to trade are kept to a minimum
• Free movement of labour and capital

Question 14

What are the characteristics of the EU

trading bloc?

Answer 14

• A single market
• some common regulations
• harmonised standards outside of the block
• monetary union
• Free movement of capital and people

Question 15

Drawbacks of using GDP to measure the size of an economy

Answer 15

• failure to account for income inequality

- failure to indicate whether the rate of growth is sustainable

Question 16

Drawbacks of GDP per capita

Answer 16

• Hides extremes such as inequalities and poverty

- Doesn’t take the cost of living into account.

Question 17

How does economic growth affect individuals?

Answer 17

• creates jobs, and average income rises
• better government spending , meaning better infrastructure and health services and standards of living etc
• However, can mean exploitation labour and environmental issues too

Question 18

How does economic growth affect businesses?

Answer 18

• Increased demand from more disposable income
• reduced costs from cheaper labour
• However, it can also mean increased inflation and competition if other firms decide to join the market too

Question 19

Define Specialisation and the possible drawbacks

Answer 19

• The focus on the production on a limited scope of goods in order to become more efficient in making it
  Drawback :
• can be risky in dynamic markets or if economic changes are uncertain

Question 20

What is protectionism and the pros and cons?

Answer 20

-The practise of shielding a country's domestic industries from foreign competition by taxing imports.
Pros: protect domestic firms 
        - created more gov rev
Cons: limits consumer choices 
         - only short term gains

Question 21

Types of protectionist laws

Answer 21

• Tariffs = tax on imported goods
• Quotas = restriction on limitation on the good or how much can be imported
• domestic subsidies = government covering costs
• legislation

Question 22

Link between specialisation and competitive advantage

Answer 22

Once specialization occurs, resulting in economies of scale, a company is able to reduce the price for its goods or services because it costs less to make their goods or provide their services. This provides a competitive advantage in the marketplace.

Question 23

What is FDI and why it takes place

Answer 23

-The taking of a controlling ownership in a company in one country outside of your own or expanding internationally

• Reasons: Access to new international markets
• Take advantage of skilled labour or use recourses only available in one country
• Helps overcome international trade
  barriers

Question 24

Pros and cons of FDI

Answer 24

Pros: Fewer regulations, costs and competitors from the current market

• Can help LEDC develop and create jobs
• market data and workers from that market are transferred

Cons: disruption to domestic practices

• foreign firm employees resisting
• Foreign markets could be volatile which could lead to added costs or reshoring

Question 25

What impacts do trading blocs have?

Answer 25

PROS - fewer regulations if in bloc = easier to obtain material - more skilled workers - protection from international comp CONS - increased costs of exports - small firms are forced out of the market - more costs as you change operations

Question 26

Pros and Cons of FDI or international trade with EMERGING ECONOMIES

Answer 26

Pros: - Possible economies of scale or new resources - specialist skills to take advantage of - growing incomes and less competition = increases profit Cons: - the market may be volatile and lead to added costs or uncertainties (risky) - exploitation of labour = ethical issues and decreased demand if consumers find out - May use tax avoidance which can damage economies