Flashcards in 2.4 Life in a Global Economy Deck (63)
The growing interconnectivity of different countries stemming from an improvement in communication and trade
Big businesses investing in new markets
What 2 things does FDI do for an economy?
- Creates jobs
- Enhances prosperity
How do some governments encourage investment into their country?
Offer incentives for investors like reduced tax
Define 'World Trade and GDP'
Measure of output and income
How has World Trade changed with globalisation?
It has become easier and therefore more common
How has globalisation affected the GDP of smaller countries?
How has globalisation led to increased migration?
International trade enhances competition so social structures change as more skilled workers are required
Give the 5 factors that have led to globalisation in the last 50 years?
- Trade Liberalisation
- Capital Market Liberalisation
- Political change in the USSR and China
- Reduced cost of travel and transport
- Increased significance of global transnational companies
Explain what Trade Liberalisation is
Trade becoming easier and more common
How has Trade Liberalisation led to globalisation?
Makes markets more competitive and increases exports
What is Capital Market Liberalisation?
Moving large sums of money from one economy to another
How has Capital Market Liberalisation led to globalisation?
More free trade has fostered economic growth
How can Capital Market Liberalisation be bad for the global economy?
A disaster in one country is going to have a big effect in other countries
When did the USSR collapse?
Why has the cost of travel and transport fallen?
Advancements in technology have made it easier and cheaper
How is globalisation important in dynamic markets?
It allows businesses to quickly make decisions and communicate quickly
The advancement of technology of using container ships
How has the increase of transnational companies led to globalisation?
Retailers have been able to shop around for cheaper products in wider markets
What is the fact that can be used in explaining the increase of transnational companies?
Some firms have GDP higher than entire countries
Define what is meant by a 'Developed Country'
A country that has industrialised long ago and has very high living standards
Give 3 characteristics of a 'Developed Country'
(Primary, Tertiary, Skilled workers)
- Small Primary Sector
- Large Tertiary Sector
- Highly skilled and educated population
Give 5 characteristics of a 'Developing Country'
(Primary, Secondary, Skilled workers, Welfare Sector, Labour)
- Large Primary Sector
- Small Secondary Sector
- Unskilled Workforce
- Small Welfare Sector
- Labour intensive
Give 4 characteristics of an 'Emerging Economy'
(Economic Growth, Living Standards, Expansion, Migration)
- Very high economic growth
- Rapidly rising living standards
- Expansion fastest in manufacturing
- Huge rural to urban migration
Give the 5 main indicators of economic growth
- HDI (Human Development Index)
- GDP per Capita
- Literacy Rate
- Mean/Median incomes
Give 1 reason that someone would measure economic growth with GDP per capita
Gives an average income that's easily comparable with other countries
Give 2 reasons why it could be bad to measure economic growth with GDP per capita
- Exchange rates skew the data
- Won't account for the hidden economy
Give 1 reason that someone would measure economic growth with the Literacy Rate
Shows the government's investment into education
Give 2 reasons why it could be bad to measure economic growth with the Literacy Rate
- Can be difficult to measure
- Doesn't only show economic growth
Give 2 reasons that someone would measure economic growth with Health
- Shows government investment into healthcare
- Can be reflective of wages (healthcare isn't free)
Give 2 reasons why it could be bad to measure economic growth with Health
- Can be misleading
- Doesn't only show economic growth on its own
What is the HDI?
A composition of Gross National Income with life expectancy and schooling years
What range of numerical values can the HDI take?
Give 2 reasons that someone would measure economic growth with the HDI
- Easily collectable data
- More representative than a factor on its own
Give 2 reasons why it could be bad to measure economic growth with the HDI
- Doesn't show spread
- Doesn't show unemployment
Give 1 reason that someone would measure economic growth with Mean/Median incomes
Can provide some additional information about income distribution and living standards
Give 1 reason why it could be bad to measure economic growth with Mean/Median incomes
Can't tell the effects of inequality
When an individual, firm or country concentrates on the production of a limited range of goods
Give an advantage of specialisation for a business
- Gain a competitive advantage through pricing
Give 2 advantages of specialisation on an economy
- Jobs created
- Exports increase which increases AD
Give a disadvantage of specialisation
Risk isn't spread
Define Comparative advantage
A natural ability to produce a good for a lower cost than competitors (e.g. tropical countries with tropical fruits)
Define Absolute advantage
An ability for a country/firm to produce a product using less resources than another
Define Trading Bloc
The umbrella term for groups of countries that come together to conduct free trade
Give the 3 types of Trading Bloc
- Free Trade Area
- Common Market
- Single Market
Define Free Trade Area
Groups of countries that trade freely with few or no trade barriers
Give the 2 features of a Common Market
Free international Trade
Free Movement of Goods and People
What is meant by a single market?
Member countries agreeing to harmonise their regulations so all businesses are on a level playing field
Give 2 advantages for a business of being in a Trading Bloc
- Encourages Efficiency as competition increases
- No retaliation through tariffs or anything
Give an advantage for the economy of being in a Trading Bloc
Exports increase which boosts AD
Give a disadvantage for the economy of being in a Trading Bloc
Imports alos increase which reduces AD through the BOP
Give 2 disadvantages for a business of being in a Trading Bloc
- Limits them to trade with only member countries
- Consumer choice is expanded so demand may fall as cheaper alternatives are discovered
Define visible import
Tangible goods that have to be driven through the channel tunnel or air-freighted
Define Invisible import
Services (e.g. tourism, finance)
Give an advantage of being in a common market for a business in terms of competitive advantage
Can find workers from abroad with the same skill set who will work for less
When the market value of a currency falls against another
When the market value of a currency rises against another
Draw the graph for appreciation
Draw the graph for depreciation
What is the effective exchange rate?
A weighted index of exchange rates which rolls all foreign currencies together in proportion to their relative importance in the economic trade pattern
What does a rising figure in the effective exchange rate mean?
They are less likely to be competitive
What does a falling figure in the effective exchange rate mean?