4.1.1 Globalisation

Question 1

4.1.1a
Define Globalisation

Answer 1

Increased proportion of economic + cultural + social activity occurs across national borders

Question 2

4.1.1a
Characteristics of globalisation

Answer 2

• Cross-border flows ↑
• Increased trade + communication
• Spread of multinational companies (MNCs)

Question 3

4.1.1b
Factors contributing to globalisation

Answer 3

• ICT improvements
• Transport Improvement
• Reduction in protectionism
• Rise of MNCs + FDI
• Financial market deregulation

Question 4

4.1.1b
ICT improvements

Answer 4

Email + internet + video calls → instant global communication → lower business costs + better coordination = global operations easier

Question 5

4.1.1b
Transport improvements

Answer 5

Containerisation + cheaper air travel → falling transport costs → firms fragment production = exploit comparative advantage more fully

Question 6

4.1.1b
Reduction in protectionism

Answer 6

• WTO = lower tariffs (e.g. 40% → 5%) → trade barriers fall → specialisation ↑ → global allocative efficiency ↑
• Trade blocs (e.g. EU, NAFTA) = tariff-free access → market size ↑ → firms expand output = economies of scale

Question 7

4.1.1b
Rise of MNCs + FDI

Answer 7

• MNCs grow + invest abroad → capital, tech and jobs flow globally = host countries develop
• FDI = injections into circular flow → ↑ GDP via multiplier
• Firms access foreign markets → higher sales = profit repatriation → improves home country current account

Question 8

4.1.1b
Financial Market Deregulation

Answer 8

• Capital controls removed → easier for firms to move money globally = investment ↑
• Fintech improvements = transactions faster + more efficient → supports 24/7 global finance

Question 9

4.1.1c
Impacts of Globalisation on countries + govt

Answer 9

• Exports ↑ → GDP ↑ → tax revenue ↑ → spending on services ↑
• BUT external shocks (e.g. US crisis) → trade ↓ → global recession risk ↑
• FDI → capital + employment ↑ → growth ↑
• BUT if profits repatriated or tax avoided → domestic benefit ↓

Question 10

4.1.1c
Impacts of Globalisation on producers

Answer 10

• Access to global markets → demand ↑ → output ↑ = economies of scale → costs ↓ → profits
• Competition ↑ → x-inefficiency ↓ → dynamic efficiency ↑
• BUT uncompetitive firms collapse = unemployment in declining industries

Question 11

4.1.1c
Impacts of Globalisation on consumers

Answer 11

• Global supply ↑ → prices ↓ = real income ↑ → choice ↑ → living standards ↑
• BUT cultural erosion and local firm closures → consumer welfare may ↓

Question 12

4.1.1c
Impacts of Globalisation on workers

Answer 12

• Skilled labour demand ↑ → wages ↑ → employment ↑
• Low-skilled jobs offshored → unemployment ↑ = income inequality ↑
• Structural unemployment if skills don’t match = long-term joblessness risk

Question 13

4.1.1c
Impacts of Globalisation on inequality

Answer 13

• Globalisation rewards capital + skills → rich-poor gap within countries ↑
• Absolute poverty ↓ in some developing countries → but relative inequality

Question 14

4.1.1c
Impacts of Globalisation on inequality

Answer 14

• Globalisation rewards capital + skills → rich-poor gap within countries ↑
  
  • Absolute poverty ↓ in some developing countries → but relative inequality ↑

Question 15

4.1.1c
Impacts of Globalisation on the environment

Answer 15

• Trade & transport ↑ → CO₂ emissions ↑ = environmental degradation
• BUT income ↑ → more funds for sustainable tech → potential long-run benefit
• Race to the bottom on regulation → environmental standards ↓

Question 16

4.1.1c
Impacts of Globalisation on structural change

Answer 16

• Inefficient industries decline → jobs lost = need for retraining + mobility
• BUT long-term: resources reallocated → productivity ↑ → growth ↑