4.1.1-4.1.9 international economics

Question 1

globalisation definition

Answer 1

the increasing integration of economies internationally

Question 2

main characteristics of globalisation

Answer 2

. free movement of capital and labour across international boundaries
. free trade in goods and services between different countries
. the availability of technology and intellectual capital to be used on an international scale

Question 3

last 50 years factors contributing to globalisation

Answer 3

-increased financial capital flows between countries
-increased integration of production
-greater number of countries involved in international trade
-increase in foreign ownership of firms
-deindustrialisation of developed countries
-developing countries increasing in obtaining skills and technology
- more international division and movement of labour

Question 4

developed countries

Answer 4

richer industrialized countries w high GDP per capita

Question 5

developing countries

Answer 5

rely on manufacturing agriculture and labour intensive industries

Question 6

what are MNCs

Answer 6

multinational corporations
firms that function in at least one other country aside from their country of origin

Question 7

factors that attract MNCs to invest in a country are

Answer 7

.availability of cheap labour and raw materials
.good transport links
.access to different markets
.proforeign investment givermnet policies

Question 8

MNCs choose to

Answer 8

divide operations and locate each part in the country with the lowest costs

Question 9

offshoring def

Answer 9

setting up a company abroad

Question 10

outsourcing def

Answer 10

subcontracting work to another organization

Question 11

causes contributing to globalisation

Answer 11

-trade liberalisation
-increase in global product standards
-reduction in real cost and time needed for transportations of goods (cheaper to export and import)
-improvement in communications tehnology
-firms wishing to increase profits
-exploit economies of scale
-increased number of MNCs and growth of significance and influence
-government wishing to obtain benefits of increased trade
-opening of new markets to trade and investment
-growth in international trading blocs
-increasing investment by states
-more international specialisation

Question 12

trade liberalization def

Answer 12

reduction and removal of tariffs and other restrictions

Question 13

benefits from globalization to economies

Answer 13

• encourages countries to specialise in goods and services- inc output
  -benefit from economies of scale and lower production costs
  -comparative advantage/ improved allocation of resources
  -lower production costs
  -greater choice
  -increased world gdp
  -improved living standards reduced absolute poverty
  -increased growth and employment
  -increased competitors
  -increased awareness and response to foreign disasters and global issues

Question 14

drawbacks of globalisation

Answer 14

-price of goods to rise (inc demand/ inc income)
-lead to economic dependency ( country dependent on other) instability of economies
-inreased world trade leads to global imbalances of bops accounts
-specialistaion leads to over reliance of industries
-individual firms may be outcompeted by foreign firms ,, out of business

Question 15

MNcs positive effects

Answer 15

.FDIs create new jobs and bring new skill
.buy local goods ,, inflow of foreign currency ,, local suppliers could export goods bcs of expanding
.MNCs benefit from economies of scale ,, more efficient
.raise living standard and provide employment

Question 16

MNCs negative effects

Answer 16

-exploit workers in developing countries
-force local firms out of business as theyll be less competitive and cant reach economies of scale
-can relocate and cause mass unemployment
-withdraw profits from one country to another with lower tax rates
-reduce choice
-influence gov policies in other countries to their advantage
-gov may reduce corp tax level to attract/keep MNCs

Question 17

globalisation effect on environment

Answer 17

-environemntal degration- more fossil fuels used
-carbon emissions rising
-deforestation
-increased depletion of non renewable resources

Question 18

consequences of globalisation in developing countries

Answer 18

-profits of MNCs return to home countries rather than host countries
-skilled workers leave to more developed countries
-local companies suffer competing with MNCs
-may exploit less skilled workers by offering low wages
-bring more efficient production methods and tech
-offer high wages and higher skilled workers
-incraesed investment in developed countries

Question 19

consequences of globalization in developed countries

Answer 19

-structural unemployment because of cheap production overseas and ,, reduction in industries
-de-industrialisation
-increased imports from inc trade ,, neg effect on bpos
- greater access to cheap raw material
-access to cheap labour ,, lower production costs

Question 20

international trade definition

Answer 20

exchange of goods and services between countries

Question 21

what can international trade do

Answer 21

give access to resources and products they won’t be able to produce themselves

Question 22

what can international trade do for consumers

Answer 22

-consumers enjoy larger variety of goods and services
-inc comp ,, lower prices
-inc choice and quality

Question 23

additional market what it allows and what it is

Answer 23

market abroad
allows firms to exploit more economies of scale

Question 24

international trade can do what to firms

Answer 24

expose firms to new skills and ideas and to specialize

Question 25

countries specialise because

Answer 25

have resources to produce efficiently better than other at producing

Question 26

specialization advantages

Answer 26

costs reduced ,, lower prices resources used more efficiently global output increased ,, increased living standards

Question 27

international trade disadvantages

Answer 27

-higher transportation costs -currency exchanges carry costs ,, financial losses -costs to firms such as complying w legal and technical requirements/ translating legal documents and advertising material -interntional trade increases globalisation

Question 28

specailosation disadvantages

Answer 28

-domestic industries forces to shut down because foreign firms produce better -overreliance of one industry -vulnerable to cuts in supply of goods they dont produce themselves -structural unemployment

Question 29

absolute advantage

Answer 29

when output of a product is greater per unit of resources used than any other country

Question 30

comparative advantage

Answer 30

uses opportunity cost the app cost of it producing a good is lower than the app costs for other countries

Question 31

the law of comparative advantages is

Answer 31

based on several assumptions ,, hard to apply to real world

Question 32

terms of trade is

Answer 32

the relative price of its exports compared to imports

Question 33

terms of trade index formula

Answer 33

= index of av price of exports/index of av price of imports x 100

Question 34

if a countrys terms of trade rises

Answer 34

its better off

Question 35

if a countrys terms of trade falls

Answer 35

its worse off

Question 36

If a countries price of exports rises but price of imports stay the same then

Answer 36

terms of trade increases

Question 37

why is trade important for developed countries

Answer 37

imports crucial to maintain high living standards products often cheaper when bought form abroad

Question 38

why is trade important for developing countries

Answer 38

import goods they dont have tech to produce themselves trade gives new materials ,, new industries creates ,, new profits ,, improve economy

Question 39

free trade means

Answer 39

unrestricted international trade like no tariffs/quotas