Key Terms Theme 4

Question 1

Superpowers

Answer 1

Countries or groupings of countries with global influence and power

Question 2

MINT economics

Answer 2

Emerging economic giants.

Coined together by economist Jim O’Neill

e.g. Mexico, Indonesia, Nigeria, Turkey

Question 3

Economy

Answer 3

The state of a country or region in terms of the production and consumption of goods and services and the supply of money.

Large set of inter-related production and consumption activities that help in deciding how scarce resources are allocated. (Econ)

Question 4

Emerging Economy

Answer 4

Developing nations that are beginning to have more power in global markets.

Still developing with an aim of becoming a developed economy.

Question 5

Employment patterns within growing economies

Answer 5

Working women - increases as the country develops

Migration - foreign companies can encourage this through demand, can also being over staff

Rise of the multi-job - people can change their professions throughout their life, home working becomes possible as infrastructure improves

Work/life balance - money increases the want for people to go out and socialise

Move away from agriculture, legislation improves.

Question 6

The result of economic growth

Answer 6

Income of citizens go up - opportunities for multi-national corporations to make revenue and profit by moving into new markets.

Increased incomes combined with low labour costs and proximity to the market makes these growing economies very attractive.

Allows businesses to get closer to their customers - depends on the nature of the product or service.

Question 7

Indicators of growth

Answer 7

GDP - the sum total of everything they produce as a nation

Literacy - the ability to read and write, average is 86.3%

Health - the World Health Organisation (WHO) keeps a record of life expectancy at birth in years

HDI - a statistic that combines life expectancy, education and income which are used to rank countries in four tiers of human development

Question 8

Recession

Answer 8

two consecutive periods (3 month) of no growth

Question 9

Imports

Answer 9

when we buy goods and services from abroad.

e.g. the UK imports bananas

Question 10

Exports

Answer 10

when we sell goods and services abroad

e.g. the UK exports whiskey

Question 11

Why we import

Answer 11

these specific goods and services are too expensive to produce in our country

Question 12

Why we export

Answer 12

it allows us to grow into new markets and increase profit and revenue

Question 13

Balance of trade

Answer 13

the difference between the value of exports and imports

Question 14

Trade Deficit

Answer 14

Imports exceed exports

Question 15

Trade Surplus

Answer 15

exports exceed imports

Question 16

Specialisation

Answer 16

when you focus on one task or subject and become an expert in that area
- increases productivity

Country - e.g. India specialise in India
Business - e.g. Apple in handheld devices
Worker - e.g. Nissan workers who put on new tyres

Question 17

Why do countries specialise?

Answer 17

There are skills and expertise in that country.

Proximity to raw materials. (closer)

Question 18

Why do businesses specialise?

Answer 18

To become more efficient.

Can gain a comparative advantage over firms.

Question 19

Why do workers specialise?

Answer 19

Division of labour

- split the production into small tasks and each worker specialises in one element.

Question 20

Benefits of Specialisation

Answer 20

Higher productivity - as expertise increases, the rate of production goes up
- as a result this this lowers unit costs as it now costs less to produce each product

Higher production rates - more can be produced which increases output
- economics of scale, bulk buying, lower costs

Increase in quality.

Question 21

What a business can do after specialising

Answer 21

either…

decrease prices - more competitive

increase profit - lower costs and maintaining prices

Branching out into international markets

• increase in exports
• increase in profits
• pay more in the domestic market
• stimulates economic growth

Question 22

Limitations of Specialisation (overspecialising)

Answer 22

Can become over-reliant on a certain industry
- putting all eggs in one basket (highly risky)

Structural Unemployment - large number of the population become unemployed

• collapse of an industry
• leads to regional deprivation

Occupational immobility - workers are only trained and skilled in one specific thing.
- lack of education

Question 23

FDI

Answer 23

Foreign Direct Investment
- a business from one country decides to establish themselves in another country.

FDI may decide to build factories on other business premises.
- e.g. Microsoft, Facebook, Amazon

Question 24

Forms of FDI

Answer 24

Joint Venture
Strategic Alliances
Mergers and Acquisitions (cross borders)
Building Greenfield Facilities

Question 25

Joint Venture

Answer 25

A formal agreement between two businesses to work on a project together. This project is a subsidary of the original business. Advantages - allows skills, knowledge and expertise to be shared across the two businesses. Disadvantages - one business benefits more than the other.

Question 26

Strategic Alliances

Answer 26

Where two businesses agree to work together, but is less formal and a new business is NOT formed. Advantages - this cooperation also allows knowledge, skills and expertise to be shared across two businesses. Disadvantages - one business benefits more than the other.

Question 27

Mergers and Acquisitions (cross borders)

Answer 27

When one firm buys another. - takeover. - the purchaser needs to buy 50% of shares or the ownership. e. g. curry's pc world e. g. a lot of car manufacturers have now merged Advantages - eliminates competition from the market. Disadvantages - expensive costs, potential culture classes.

Question 28

Building Greenfield Facilities

Answer 28

Starting to build factories or premises from scratch in foreign countries. Advantages - allows more control for the business. Disadvantages - legislation barriers (buying property) - permits, abroad can be different

Question 29

How to write a Conclusion

Answer 29

Answer - yes there will be an impact - should be positive Justify - ... It depends on - ... Most important point - ...

Question 30

Globalisation

Answer 30

The process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange. Global markets are national markets created by firms exporting, importing or offshoring.

Question 31

What does the World Trade Organisation do?

Answer 31

Promotes free trade Setup trade agreements Resolve trade disputes

Question 32

Trade Liberalisation

Answer 32

Where countries aim to reduce or remove the barriers to trade. - encourages countries to communicate and trade. - increases globalisation.

Question 33

Tariffs

Answer 33

a tax on imports.

Question 34

Protectionism

Answer 34

The theory or practice of shielding (or protecting) a countries domestic industries from foreign competition by taxing imports, imposing quotas or passing laws. - e.g. choosing to slow the rate of imports.

Question 35

Factors leading to Globalisation

Answer 35

Reduction of international trade barriers Political change Reduced cost of transport and communication Increased significance of global companies Migration Increased FDI flows Structural change Growth of the global labour force

Question 36

Methods of Protectionism

Answer 36

Tariffs | Quotas

Question 37

Why are tariffs imposed?

Answer 37

Protects domestic firms. - makes it more expensive for customers to buy foreign goods. - this should increase demand for domestic businesses. - more competitive by pricing. Generates tax revenue for the local government. - this tax revenue can be used to improve public services, infrastructure, etc. - causes economic growth.

Question 38

Success of a tariff depends on...

Answer 38

The PED of the product. - inelastic? no impact on demand. The rate of the tariff.

Question 39

Quotas

Answer 39

A physical limit on the number of goods able to enter a country. Why/Advantages - reduces the supply of that good. - means the customer has less choice. - the price goes up, this benefits the domestic business as they can charge higher prices. - more profit, covers costs more effectively. Disadvantages - complex on the administrative side. e.g. China has a quota on foreign music and movies.