4.1.1 Globalisation Flashcards
(25 cards)
1
Q
What is globalisation?
A
Process where national economies are becoming increasingly interconnected and interdependent.
2
Q
What are the causes of globalisation?
A
- trade liberalisation
- growth of trading blocs
- growth of MNCs
- technological advances
- fall in transport costs
- greater mobility of labour and capital
3
Q
What is trade liberalisation?
A
- Barriers to trade (e.g., tariff barriers) have decreased due to countries realizing the benefits of free trade through comparative advantage.
- As a result, trade has increased between countries, proven by trade as a % of world GDP increasing, leading to greater economic integration.
4
Q
What is the growth of trading blocs?
A
- Newly formed or deepened integration of trading blocs promotes more free trade and easier movement of labour between member states.
- Consequently, more trade and labour migration between these members is promoted, and FDI increases, leading to greater integration of economies.
5
Q
What is the growth of MNCs?
A
- As technology improves, mobility of capital, and access to world markets become easier.
- Consequently, to expand further, MNCs will move and operate in various countries, leading to greater interdependence of nations through increased FDI.
6
Q
What are technological advances in globalisation?
A
- Improvements in the internet, software, and transportation.
- As a result, it becomes more efficient to trade internationally and operate businesses, leading to quicker and cheaper market openings, increasing trade, FDI, and migration flows.
7
Q
What is the increased mobility of labour and capital?
A
- Growth of trading blocs, tax incentives, tech improvements, and labour market deregulation make labour and business mobility easier, cheaper, and quicker.
- Consequently, FDI has increased, with large businesses setting up locations worldwide and migration flows increasing as workers seek to maximize their earning potential.
8
Q
What is the fall in transport costs?
A
- Occurred due to innovations and greater privatisation of transport.
- As a result, trade in the form of shipping is cheaper and faster, promoting more trade, FDI, and migration flows.
9
Q
What are the advantages of globalisation?
A
- Exploitation of comparative advantage
- Large economies of scale
- Increased competition and lower prices
- Increased choice for consumers and businesses
- Higher rates of economic growth
- Faster rates of technology transfers
- Ability for firms to produce offshore
- Benefits of inward migration
10
Q
What is exploitation of comparative advantage?
A
- With greater free trade and specialisation, resources are allocated where countries have their comparative advantage.
- Consequently, allocative efficiency is attained with money acting as a means of exchange.
11
Q
What are large economies of scale?
A
- With a larger international market to access, businesses can grow larger and sell to more consumers worldwide.
- This leads to greater purchasing and technical economies, lowering average costs of production, resulting in productive efficiency.
12
Q
What is increased competition and lower prices?
A
- Businesses can source raw materials globally at the cheapest prices, lowering production costs and prices, increasing market share and profitability.
- Consumers benefit from a greater market for goods and services, increasing welfare and living standards.
13
Q
What are higher rates of economic growth?
A
- Greater market size and specialisation lead to higher export potential and revenue generated from exports for countries with large comparative advantages.
- Assuming M expenditure doesn’t exceed X, AD will increase, leading to economic growth.
14
Q
What are faster rates of technology transfers?
A
- Better access to new technology/products improves efficiency for businesses, increasing profitability.
- Consumers benefit from lower prices and access to innovative goods and services.
15
Q
What is the ability for firms to produce offshore?
A
- Improvements in technology and transportation make it easier for firms to produce overseas, benefiting from lower production costs.
- This leads to increased profitability, accelerating innovation and tech advancements through R&D.
16
Q
What are the benefits of inward migration?
A
- Countries attracting migrant labour benefit from unique skill sets that fill job vacancies, boosting productivity and tax revenue.
- Migrants send income back home, increasing living standards for families abroad.
17
Q
What are the disadvantages of globalisation?
A
- Growing income inequality
- Higher structural unemployment
- Trade imbalances
- Environmental costs
- Over-specialisation
- Costs of migration
18
Q
What is growing income inequality?
A
- Higher growth may not translate into higher incomes for all, failing to meet key macroeconomic objectives.
19
Q
What is the rise in structural unemployment?
A
- Major industries may decline as they struggle to compete internationally, leading to occupational immobility and the need for government retraining.
- This incurs direct costs for retraining and indirect costs from higher unemployment benefits and lower tax revenue.
20
Q
What are trade imbalances?
A
- Levels of international debt have increased significantly to fund current account deficits.
- As countries become more integrated, a shock affecting one country can impact others.
21
Q
What are environmental costs?
A
- Increased FDI has led to negative externalities such as resource depletion and high pollution levels.
- Consequently, quality of life is negatively affected, hindering economic development.
22
Q
What is over-specialisation?
A
- Countries exploiting their comparative advantage may become too reliant on a narrow range of goods and services.
- If these industries collapse, no alternative industries may be available for growth and development.
23
Q
What are the costs of migration?
A
- The ‘brain drain’ effect incentivizes workers to move abroad for higher incomes, reducing long-term growth rates and prosperity in developing countries.
- This can lead to job losses for locals as migrant labour enters the market.
24
Q
What are the advantages of multinationals setting up in the UK regarding jobs?
A
- Increased employment as new workers from the host country may be hired, increasing tax revenue and stimulating further rounds of spending through the multiplier effect.
25
What are the disadvantages of MNCs in regards to jobs?
- Employment may decrease as MNCs may bring in their own workers and suppliers, leading to job losses for domestic firms and a fall in tax revenue.
