4.1 Growing Economies

Question 1

Definition of Globalisation

Answer 1

How the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange

Question 2

Definition of Economic Globalisation

Answer 2

The widespread international movement of goods, capital, services, technology and information

Question 3

Definition of Political globalisation

Answer 3

The development and growing influence of international organisations means governmental action takes place at an international level

Question 4

Definition of Cultural globalisation

Answer 4

Refers to the transmissions of ideas, meanings and values around the world in such a way to extend and intensify social relations

Question 5

Reasons for globalisation

Answer 5

An espansion of trade in goods and services between countries
An increase in transfers of financial capital across national boundaries
Development of global brands
Shifts in production and consumption
Increase levels of labour migration
Shifts in economic and political strength

Question 6

What does BRIC stand for

Answer 6

Brazil
Russia
India
China
emerging economies that have significantly grown in power

Question 7

What does MINT stand for

Answer 7

Mexico
Indonesia
Nigeria
Turkey
Next most powerful emerging economies in the world

Question 8

Definition of Emerging/Developing Markets

Answer 8

A country with some characteristics of a developed market but does not satisfy standards to be termed a developed market

Question 9

Definition of Developed Countries

Answer 9

A high income country which is more economically developed with a high quality of life and more advances technological infrastructure

Question 10

Key characteristics of a emerging market

Answer 10

lower than average per capita income
sudden economic growth
high volatility from factors such as natural disasters, external price shocks and political instability
changes in exchange rates
The potential for growth but need the investment

Question 11

Implications of economic growth for individuals and businesses

Answer 11

trade opportunities
employment patterns
health
literacy rates
gross domestic product
human development indedx

Question 12

Definition of Competitive Advantage

Answer 12

A party provides better value than its competitors

Question 13

Definition of Comparative Advantage

Answer 13

Country produces a good or service for lower opportunity cost than other countries

Question 14

Definition of Specialisation

Answer 14

focusing on one task or product to increase the speed and skill with which the job can be done and so improve efficiency

Question 15

Definition of Imports

Answer 15

buying products from a foreign country

Question 16

Definition of Exports

Answer 16

sellings products to a foreign country

Question 17

Pros and cons of exporting+

Answer 17

pros:
more sales as more customers can be targeted worldwide
increased profits
take advantage of economies of scale
Cons:
exchange rate fluctuations
At risk of changes in demand from abroad that may affect your sales and leave too much stock

Question 18

Pros and cons of importing

Answer 18

pros:
reduced manufacturing costs
can get resources and prodcuts that you wouldn’t have normally
higher quality products available
cons:
exchange rates fluctuations
aren’t contributing to their economy

Question 19

Pros and cons of specialisation

Answer 19

Pros:
increased productivity and output
economies of scale
comparative advantage
gdp growth
boost economic growth
cons:
over reliance on one industry
competition may enter the market
disecnomies of scale could set in

Question 20

Definition of Foreign Direct Investment (FDI)

Answer 20

investing by setting up operations or buying assets in a business in another country

Question 21

Definition of Horizontal FDI

Answer 21

a business takes over/set up a business that is doing the same thing in another country

Question 22

Definition of Vertical FDI

Answer 22

a firm acquires a complementary business in another country

Question 23

Definition of Greenfield FDI

Answer 23

Build a completely new factory or business

Question 24

Definition of Brownfield FDI

Answer 24

Buy an existing business and grow it

Question 25

Definition of Host country

Answer 25

a country that will receive the foreign direct invetment from foreign investors

Question 26

Pros and cons of FDI to host country

Answer 26

pros: brings high paying, new jobs brings new technology and creates new markets increases exports cons: exploitation may affect the exchange rate political instability makes it risky

Question 27

What can globalisation lead to

Answer 27

people have more choice about where they live and work high level of interdependency between countries capital and goods flow more easily

Question 28

Factors that contribute to globalisation

Answer 28

Reduction of trade barriers political change reduced transport costs increased significance of global companies increased investment flows migrations growth of the global labour force structural change

Question 29

Definition of Protectionism

Answer 29

is an approach used by governments to protect domestic producers

Question 30

Reasons governments use protectionism

Answer 30

protect jobs protect infant industries prevent dumping raise revenue prevent the entry of harmful goods improve the balance of payments

Question 31

What some barriers to trade

Answer 31

taxes/tariffs import quotas subsidies product quality requirements subsidies/tax breaks trade marks, IP and copyright protection

Question 32

Definition of Tariffs

Answer 32

a tax placed on an import to increase its price and decrease its demand

Question 33

Why do we have Tariffs

Answer 33

Raise tax revenue Environmental reasons Protectionism to protect fledgling domestic industries protect aging and inefficient domestic industries foreign producers who face the tariffs cut production due to reduced demand reduction in production can mean los of jobs

Question 34

Pros and cons of protectionism

Answer 34

pros: forcing fairer competition starting point of international negotiations and agreements source of government revenue encouraging domestic production growth cons: trigger retalisation from partner countries consumers bear higher prices raises deadweight loss

Question 35

Pros and cons of tariffs

Answer 35

Pros: Domestic produced goods do not incur the tariff and so are likely to be cheaper Tariff protection allows domestic businesses to sell more because they gain a price advantage compared to imports Domestic producers gain price advantage It can ensure better job security It can protect new infant businesses from being swamped by international competition from MNCs It can aid economic growth by improving the GDP It can raise important tax revenue for government which can be spent possibly on infrastructure It reduces imports so improves balance of trade Cons: High import price won’t put many firms off. Tariffs may just increase prices for consumers Restricts the volume of trade. Other countries may impose their tariffs in response to this on their imports.

Question 36

Definition of Import Quotas

Answer 36

A physical limit on the quantity of a good imported or exported

Question 37

Why are import quotas used

Answer 37

Allows country to be sure on the amount of the good imported from the foreign country Imposed to protect jobs of domestic producers Imposed as a bargaining chip to be used in negotiations on trade Protect strategic industries

Question 38

Pros and cons of import quotas

Answer 38

Pros: Boosts local investment Protects domestic business Creates more job opportunities Boost revenue More effective at restricting trade tan tariffs Do not depend on the elasticity of demand or changes in exchange rates Cons: Protect infant businesses Trading partners could do the same Complex for the country using them Difficult to measure Government does not get revenue Domestic consumers bear higher prices May be beneficial for some importers but not for others

Question 39

Definition of Subsidies

Answer 39

Money is given to local producers to make their goods cheaper on the domestic market

Question 40

Types of trading blocs

Answer 40

Preferential trading area Free trade area Customs union Common and single markets Economic and monetary integration

Question 41

What is Preferential trading areas (PTAs)

Answer 41

Allows certain products to receive reduced tariffs and can lead to a free trade area being developed

Question 42

What is Free trade areas (FTAs)

Answer 42

The removal of all barriers allowing individual member states to negotiate separately with non members

Question 43

What is customs unions

Answer 43

Same as FTA but have a common set of barriers against non member states

Question 44

What is common and single markets

Answer 44

Same as custom unions but allows for the free movement of goods, labour and capital Tariffs are generally removed and non tariff barriers are eliminated

Question 45

What is economic/monetary unions

Answer 45

Both customs union and common market but a common currency is used

Question 46

Pros and cons being in a trading bloc

Answer 46

Pros: Freedom to trade Enlarged market Protection from international competition outside of the bloc Freedom of movement of people Cons: Inefficiency is protected Retaliation Protectionism Damages small businesses