2.4 Life in a Global Economy

Question 1

What is globalisation

Answer 1

The increasing integration of the worlds national economies into a single international market

Question 2

Factors contributing to globalisation

Answer 2

-Trade in goods/services
-Trade liberalisation
-Multinational corporations (MNCs)
-Comms and IT
-Emerging economies

Question 3

What are the 3 indicators of growth

Answer 3

-GDP per capita
-Literacy and health
-Human development index HDI

Question 4

What is specialisation

Answer 4

When each worker completes a specific task in the production process

Question 5

What are the advantages of specialisation

Answer 5

-Higher output and quality
-Greater variety of goods and services produced
-Economies of scale
-More competition

Question 6

What are the disadvantages of specialisation

Answer 6

-Work repetitive
-More structural unemployment
-Higher work turnover

Question 7

What is absolute advantage

Answer 7

Occurs when a country can produce more of a good

Question 8

Trading bloc: Free Trade Area (FTA)

Answer 8

Definition: Countries remove tariffs and quotas on trade between them, but keep their own trade policies with non-members.

Example: NAFTA (now USMCA – USA, Mexico, Canada)

Key Point: Trade is free within the bloc, but members can have different external tariffs.

Question 9

Trading bloc: Customs Union

Answer 9

Definition: Free trade between members + a common external tariff on non-members.

Example: Mercosur, EU Customs Union

Key Point: No internal tariffs and same trade rules for imports from outside the union.

Question 10

Trading bloc: Common Market

Answer 10

Definition: Customs union + free movement of labour, capital, and goods/services.

Example: European Single Market

Key Point: Allows economic integration beyond just trade – workers and businesses can operate freely across borders.

Question 11

Trading bloc: Economic and Monetary Union (EMU)

Answer 11

Definition: Common market + shared economic policies and a single currency.

Example: Eurozone (countries using the euro)

Key Point: Deep integration including a shared central bank and monetary policy.

Question 12

Benefits of trading blocs

Answer 12

-Economies of scale
-Increased competition
-FDI Foreign Direct Investment

Question 13

Negatives of trading blocs

Answer 13

-Trade diversion
-Uneven gains
-Overdependence

Question 14

What is the impact when Domestic Currency Appreciates (opposite for depreciates)

Answer 14

-Exports more expensive
-Imports cheaper
-Reduced revenue from oversee sales
-Foreign earnings lose value
-Competitive disadvantage