2.4.1 - 2.4.4

Question 1

Globalisation

Answer 1

Increasing interdependence of world economies

Question 2

Open economies

Answer 2

Importing and exporting high proportion of used goods and services

Question 3

Structural change

Answer 3

Production lowers when demand falls and vice versa

Technology change and international competition affect this

Question 4

Foreign Direct Investment

FDI

Answer 4

Businesses expand into other countries
(Often HIC -> LIC)
(Lower wages = Cheaper production)

Question 5

Outsourcing

Answer 5

Shifting production to another business to reduce input costs

Question 6

Trade liberalisation

Answer 6

Limiting + reducing trade barriers

Question 7

International capital flows

Answer 7

Large sums of money moved from one country to another

FDI/wealthy individuals moving to different bank/buying stores in foreign businesses

Question 8

Multinational corporations

Transitional corporations

Answer 8

Businesses with interests in more than one economy can start off small but eventually dominate their market sector

Question 9

Developed economies

Answer 9

High per capita incomes
Higher literacy rates
High life expectancy
Large service sectors

Question 10

Developing economies

Answer 10

Lower incomes (usually)
Weaker education systems 
Weaker welfare systems
Abundant and cheaper labour
Little capacity investment

Question 11

Emerging economies
Eg. BRICS
(Brazil, Russia, India, China, South Africa)

Answer 11

Rising investment levels
Increasing production in secondary sector
International trade growing
Collaborate with MNCs

Question 12

Purchasing Power Parity

PPP

Answer 12

Compares currencies when buying a basket of goods

Big Mac Index

Question 13

Absolute advantage

Answer 13

When real resource cost of a product is lower in one county than in another

Question 14

Comparative advantage

Answer 14

A country specialises in producing one good, trades with another country that specialises in another good to increase products in both countries
(Opportunity cost)

Question 15

Free trade areas

Answer 15

Countries that trade freely with one another with few barriers and restrictions

Eg. NAFTA
The North American Free Trade Association
Canada, USA, Mexico

Eg. ASEAN
The Association of Southeast Asian Nations
Largest free trade area by population
3rd largest by GDP

Question 16

Common markets

Answer 16

Free trade internally and a single unified trade policy for all member countries’ trade with the rest of the world

Question 17

Single market

Answer 17

Member countries agree to harmonise regulations so that businesses compete on a level playing field

Eg. European Union (EU)

Question 18

Economic Union

Answer 18

Adoption of similar economic policies by agreement within the union
Monetary and fiscal policies are not agreed

Question 19

Trading Blocs

Answer 19

Trade is freer, easier, fairer
Varies from loose grouping to tightly built communities
Some agreement made between countries (bilateral agreements)

Question 20

Floating exchange rate

Answer 20

Fluctuating exchange rates

Question 21

Appreciation

Answer 21

When the exchange rate is rising due to increased demand or reduced supply

Question 22

Depreciation

Answer 22

Falling values -> A unit of currency buys less

Question 23

Eurozone

Answer 23

The group of countries where the Euro is their currency

Question 24

SPICED

Answer 24

Strong
Pound
Imports
Cheaper
Exports
Dearer

Question 25

WPIDEC

Answer 25

Weaker
Pound
Imports
Dearer
Exports
Cheaper