Flashcards
Globalisation and Trade
Cards in this deck (25)
- 1explain what is meant by globalisation?Globalisation is the increasing integration of economies internationally
- 2Factors promoting globalisation-fewer protectionist measures like tariffs and quotas which creates barriers to trade
- less restrictions on movement of capital and labour, so firms can easily invest in other countries and outsource their production
- lower transport costs making international trade less costly
- lower communication costs and better IT making it easier for international firms to coordinate their production overseas and also easier to share specialist knowledge and technology
- increasing global incomes, as people's global incomes, increase around the world there is demand for a wider range of goods and services - 3what are the main characteristics of globalisation?-an increase in free trade of goods and services between countries
-increased flows of factors of production
- increased flows of finance
-increased flows of technology - 4Explain a political factor and a global factor that is contributing towards globalisation?political -
International bodies such as the United Nations lead to a convergence of political decisions, so they make more joined decisions made by countries
more international cooperation
cultural -
spread of things such as McDonald's and Starbucks across the world - 5causes contributing to globalisation1. trade liberalisation
2. a reduction in cost and time needed for the transportation of goods meaning is it cheaper to export and import
3. improvements in Communications Technology
4. multi-national corporations setting up factories in developing countries leading to an increase in foreign direct investment - 6Define multinational corporation & foreign direct investmentMultinational corporation Is a firm whose operations are based in more than one country
FDI (foreign direct investment) is when there is investment in a country by a firm based in another country - 7Define Trade Liberalisationreduction or removal of tariffs and other restrictions on international trade
- 8Advantages of globalisation- trade encourages countries to specialise which increases output, this leads to improvements in efficiency and allocation of resources
- globalisation has helped to improve living standards and reduce the levels of absolute poverty in the world due to employment increasing due to the output of the country increasing
-world GDP has risen leading to increased growth, Employment and competition - 9disadvantages of globalisation-Globalisation has led to Economic Dependency this leads to instability in in in economies
- specialisation can lead to over-reliance of some Industries by an economy
- an individual firm may be out completed by foreign firms - 10the effects of globalisation on the environment- international trade leads to greater Resource depletion and it contributes to climate change as more fossil fuels are burnt
- carbon emissions are increased due to Rising production levels
- Deforestation
- increased depletion of non-renewable resources like metal ores - 11Multinational corporations positive effects+MNCs bring about foreign direct investment (FDI) creating jobs bringing new skills and wealth to an economy may also lead to inflows of foreign currency
+they can benefit from economies of scale helping them to be more efficient
+ they can raise living standards by providing employment
+ increases employment and thus tax revenue
+ increases capital and technology
+ there will be an injection in the circular flow of income - increase in employment means there are higher incomes which creates a multiplier effect leading to increases AD - 12multinational corporations negative effects- may exploit workers due to paying them lower wages than in a developed country
- they can put local firms out of business due to them not being able to compete against them
- they can withdraw profits from a country and place them in another would low tax rates so the former country won't be able to gain tax revenue for those profits
- profit making business and therefore they want to benefit shareholders
-pollute enviroments
-may increase rural-urban inequality - 13a negative of globalisation-Globalisation may have contributed to increasing levels of inequality within many countries
- In some emerging countries such as China and India, the gaps between the wealthiest and poorest citizens has increased significantly - 14FDI advantages and disadvantages+ increases employment and thus tax revenue
+ increases capital and technology
+ there will be an injection in the circular flow of income - increase in employment means there are higher incomes which creates a multiplier effect leading to increases AD
- - 15emerging economy meaningAn emerging economy is an economy that has experienced rapid economic growth and some industrialisation and characteristics of developed markets
- 16BRIC countrya BRIC country (including Brazil Russia India and China) is a country which experienced rapid economic growth and closing the gap on the developed economies
began forming a political group and having meetings - 17Absolute advantage definitionabsolute advantage
is when one country is able to produce some more of a good and service with the same resources, such that the unit cost of production is lower - 18Comparative advantage definitioncomparative advantage is when one country can produce a good at a lower relative opportunity cost than others
- 19What is a factor endowmentfactor endowment-
is a mix of land labour and capital that a country possesses - 20what is a factor intensitya Factor intensity is a mix of land, Labour and capital that is needed to produce a good
- 21What are the terms of trade & how to calculate itterms of trade are the price of the country's exports relative to the price of its imports.
index of average export prices/ index of average import prices
x100
X/M x 100 - 22Heckscher Ohlin theory of international trade?The theory that a country will export goods that are intensive in factors of Production that it has a lot of and import goods that are intensive in factors of production that is little of
-Factor endowment
-products that are intensive in that Factor
-Specialisation
- export them - 23weaknesses of comparative advantage and Heckscher Ohlin Theory- doesn't take into account the transport costs which may outweigh gains from specialisation and trade
- doesn't take into account the protectionist measures which will distort the effects of comparative advantage - 24Effects of trade- rise in global GDP as countries specialising goods/ services where they have comparative advantage this means goods are produced at a lower opportunity cost and therefore scarce resources they use more efficiently. this leads to an increase in world GDP.
- increased economies of scale, as firm start to produce goods and services for foreign export markets as well as domestic market, they will increase output. as they increase output they gain economies of scale leading to lower average costs.
- increase competition, as domestic Firms will have to compete with or importgoods there will be downward pressure on prices which will reduce firms profits. this also increases the pressure on firms to produce goods more efficiently reducing their average cost so they have to maintain their profits
- dynamic efficiencies these are efficiencies that are over time from trade examples our knowledge and technology transfer as firms invest in other countries and bring with them specialist knowledge and technology
- factors prices will level out the similar factors of production, unskilled l - 25Prebisch singer hypothesiscountries that export primary products will face declining terms of trade in the long run which will trap them in low-level development as more and more exports will be sold to pay for the same value of imports for secondary sector goods. therefore terms of trade for many developing countries are getting worse creating problems for those countries as it makes it harder to afford important goods from other countries that fuel,cars & medicine. this will reduce living standards and worse and development indicators. it also makes it more expensive to import capital goods from overseas which will slow down investment, harming both short run and long run economic growth.
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- A level Economics Flashcards on Globalisation and Trade, created by Anna Zavolnyi on 04/03/2018.
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- Anna Zavolnyi
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