section 6

Question 1

globalisation

Answer 1

the ever increasing integration of the worlds local, regional, and national economies into a single, international market

involves the free trade of goods and services, free movement of capital and labour
and the free interchange of technology and intellectual capital

Question 2

what does increased globalisation bring

Answer 2

more trade of goods and capital between moore nations

brands developing globally

labour has been divided between several countries

more migration, and more countries participating in global trade

higher levels of investment

more interdependance - shown through the gfc

Question 3

factors contributing to globalisation

Answer 3

trade in goods

trade in services

trade liberalisation

multinational corporations

international financial flows

communications and it

containerisation

Question 4

consequences of globalisation

Answer 4

trade imbalances between countries

imbalances in consumers / countries access to health, education and markets

governments may lose soverignty

producers and consumers earn benefit of specialisation - economies of scale increase

increase in world gdp

workers can travel

the enviroment may suffer

Question 5

trade in goods and services in globalisation

Answer 5

gives developing countries capital + knowledge to manufacture

some countries have advantage of cheaper leader, which increases demand for production there

services like tourism, call centres, software production (particularly in india) have provided employment in developing countries due to hedcs outsourcing labour

Question 6

trade liberalisation

Answer 6

growing strength and influence of organisations such as the world trade organisation (wto)

which advocates free trade, and has contributed to the decline in trade barriers

Question 7

mncs (multinational corporations) in globalisation

Answer 7

organisations which own or control the production of goods and services in multiple countries

they have used marketing to become global

they have been able to take advantage of economies of scale (such as risk-bearing)

they have lower costs of production through globalisation

Question 8

communications and it in globalisation

Answer 8

the spread of it has made it easier and cheaper to communicate

which has led to increased interconnection

better transport links

“death of distance”

Question 9

containerisation

Answer 9

cheaper to ship goods across the world

causing import prices to fall, which increases competition

however, mainly exploited by mncs and can result in structural unemployment due to replcaement of labour

Question 10

individual countries in globalisation

Answer 10

trade imbalances between countries (current account deficits vs surpluses within a trade partnership)

imbalances and inequalities in countries access to health, education, and markets

income and wealth inequalities if the benefits and costs of globalisation are not evenly spread (e.g. china)

Question 11

governments in globalisation

Answer 11

concerns on loss of sovereignty

due to increased international treaties

individual states unable to resist the force of them

countries in trade organisation have to follow the rules

Question 12

producers and consumers in globalisation

Answer 12

both earn the benefits of specialisation and economies of scale as firms become larger

firms operate more competitive enviroment (lower costs and increase efficiency)

producers can also exploit globalisation for cheaper labour and international technological adancements

improved living standards from increased world gdp
but can be inequal

Question 13

workers in globalisation

Answer 13

can take advantage of job opportunities across the globe

however can cause structural unemployment (e.g. uk after the collapse after mining industries, due to globalisation and importing the goods)

however could argue globalisation speeds up the process to tertiary markerts

mncs have opportunity to exploit labour

however could also provide labour where there was none before

Question 14

the enviroment in globalisation

Answer 14

industrialisation
deforestation
water scarcity
land degradation
transport
consumerism
technology
demand for mining
all increase, bad for enviroment

however, as incomes increase so does peoples concerns for the enviroment

so whilst globalisation itself is horrible for the enviroment, people are more willing to limit their own personal neg con/prod. ext. ???

also globalisation means increased investment which could help find enviromentally healthy alternatives without compromising economic growth

Question 15

absolute advantage

Answer 15

it can produce a good using fewer recources and at a lower cost than another country

Question 16

comparative advantage

Answer 16

a country can produce a good at a lower opportunity cost than another country

this means they have to give up producing less of another good than another country, using the same recourses

countries specialising when they have comparative advantage increases economic welfare

Question 17

benefits of free trade

Answer 17

countries can exploit comparative advantage - higher output less recourses used, increases world gdp + living standards

increases economic efficiency by establishing a competitive market (lowers costs of production and increases output)

more consumption and increase in economic welfare

more exports = higher rates of economic growth

specialisation means countries can exploit economies of scale (lower costs)

Question 18

free trade

Answer 18

act of trading between nations without protectionist barriers

Question 19

protectionist barriers

Answer 19

tariffs

quotas

regulations

Question 20

free trade costs

Answer 20

results in some job losses due to cheaper labour abroad

contributes to environmental damage
especially from increase in mass manufacturing

Question 21

deindustrialisation of the uk

Answer 21

means the manufacturing sector has declined in uk - shiftinng to other countries (eastern, usually china)

uk now focuses more on services

Question 22

impact of emerging economies

Answer 22

collapse of communism has meant more countries are participating in world trade

interntaional trade is arguably more improtant for developing countries than developed countries

Question 23

international trade as % of gdp in ledc / hedc (usa)

Answer 23

ledc - 20%

hedc (usa) - 8%

Question 24

eu common agricultural policy

Answer 24

menas domestic farmers recieve subsidies to encourage domestic production and lower costs

protecting primary sector within countries

and limited competition from farmers in other countries - win for domestic farmers and cost for overseas farmers

Question 25

protectionism

Answer 25

the act of guarding a countrys industries from foreign competition

Question 26

tarriffs

Answer 26

taxes on imports to a country quantity demanded of domestic goods increase whilst the quantity demanded of imports decreases could lead to retaliation so exports might decrease

Question 27

quotas

Answer 27

limit the quantity of a foreign produced good that can be sold on the domestic market sets a physical limit on a specific good imported in a set amount of time rise in price of the good for domestic consumers - so they consume less / buy domestic version

Question 28

export subsidies

Answer 28

form of government intervention to encourage goods to be exported rather than sold on the domestic market the government might use direct payments tax relief or provide cheap access to credit

Question 29

embargoes

Answer 29

complete ban on trade with a particular country usually politically motivated as significant economic impact e.g. oil embargo after yom kippur war // embargo on russian oil in russo-ukrainian conflict

Question 30

consequences of adopting protectionist policies

Answer 30

supports infant industries (how japan and usa grew) trade deficit may reduce can be used to correct market failure (demerit goods) protect domestic jobs could distort market and lead to loss of allocative efficiency through reduction in competition extra costs on exporters may damage the economy tarriffs are regressive and hurt the poorest in society in the most risk of retalisation could lead to government failure

Question 31

customs union

Answer 31

establishment of a common trade policy with the rest of the world by a group of countries also with free trade between members e.g. european union also involves common customs, rules, and procedures common trade policy

Question 32

what is balance of payments made up of

Answer 32

the current account the capital account the financial account balancing item (used to make sure they balance)

Question 33

uks current account deficits and surplus

Answer 33

we have an overal deficit and deficit with goods but surplus with services :)

Question 34

cause of balance of payments disequilibrium

Answer 34

value of currency economic growth competition deindustrialisation membership of trade union attractiveness to foreign investors

Question 35

policies that could be used to correct a balance of payments deficit / surplus

Answer 35

-fiscal income tax increase reduced government spending (effective in sr but not as much in structure or long run) -monetary expenditure-reducing and switching aiming to reduce demand + swicth demand to domestic reducing growth in supply of money lower interest rates to lower value of currency high interest rates to decrease consumption exchange rate (time lag with monetary policies, such as interest rates) -supply side domestic economy being made attractive to investors domestic economy made more competitive (deregulation and privatisation) however side effect of monopolies subsidies to encourage production, but could lead to retalliation or moral hazard

Question 36

what do expesnive costs of raw materials lead to

Answer 36

cost push inflation due to higher costs

Question 37

what do balance of trade imbalances suggest about an economy

Answer 37

too much interdependance or reliance on the performance of other economies (e.g. uk in gfc)

Question 38

floating exchange rates

Answer 38

the value of the exchange rate in a floating system is determined by the forces of supply and demand

Question 39

fixed exchange rate

Answer 39

has a value determined by the government compared to other currencies can be manipulated by the central bank through the buying and selling of currencies

Question 40

managed exchange rates

Answer 40

combine the characteristics of the floating and fixed exchange rate systems

Question 41

advantages of a fixed exchange rate

Answer 41

allows firms to plan investments they know they will not be affected by harsh fluctuations in the exchange rate it gives the monetary policy a focused target to work towards

Question 42

disadvantages of a fixed exchange rate

Answer 42

the government and central bank do not necessarily know, better than the market, where the currency should be balance of payments does not automatically adjust to economic shocks can be costly and difficult for government to hold large reserves of foreign currencies

Question 43

advantages of a floating exchange rate

Answer 43

the exchange rate automatically adjusts to economic shocks it gives the monetary policy more freedom to focus on other macroeconomic objectives

Question 44

disadvantages of a floating exchange rate

Answer 44

the fluctuations in the price of the exchange rate can be unpredictable and make investment planning difficult also effects the exports and imports in a country which can cause lots of unemployment if an industry in particular is affected could make the exchange rate vulnerable to speculative shocks

Question 45

advantages of joining a currency union (eurozone)

Answer 45

more currency stability less prone to speculative shocks - offers more certainty which increases investment and growth potential fewer admin fees and less restructions when exchanging money benefis firms which trade with different member states, may reduce costs (through the saving of time and money for sharing a currency) lower interest rates due to german monetarial credibility - encouraging investment and spending and jobs

Question 46

disadvantages of a single currency / currency union (eurozone)

Answer 46

labour mobility is limited due to language barriers differences in economic performances mean common monetary policies may not be effective member nations lose sovereignty when there is a common monetary union exchange rate is not flexible to meet each countrys need the one off costs of joining a currency union can be significant

Question 47

economic growth

Answer 47

increase in the countries real national output caused by increases in the quality or quantity of factors of production (outward shift in ppf / lras)

Question 48

economic development

Answer 48

living standards, freedoms (from opression), and life expectancy the moral side of economic grwoth also concerns the sustainability of the economy

Question 49

characteristics of ledcs

Answer 49

low life expectancies high mortality rates high dependency ratio low gdp fast population growth low levels of education poor standards of living poor nutrition, lack of access to clean/safe drinking water, and a lack of sanitation poor or absent health care provision

Question 50

indicator of development

Answer 50

hdi

Question 51

what does hdi measure

Answer 51

education life expectancy gross national income per capita

Question 52

average world hdi from 1970 to 2010

Answer 52

0.48 - 0.68

Question 53

advantages of using hdi to compare development

Answer 53

does allow for more human economic comparrisons to be made provides a broader comparison between countries than gdp does healthcare and education are beneficial and important for countries to prioritise so hdi can be used to show the effectiveness of a countries infrastructure as a whole

Question 54

limitations of using hdi to compare development

Answer 54

does not consider political freedom, human rights or cultural equality does not take the enviroment into account does not consider the distribution of income

Question 55

other indicators of development

Answer 55

human poverty index gender-related development inex

Question 56

human poverty index hpi

Answer 56

measures life expectancy education ability of citizens to meet basic needs

Question 57

factors that affect growth / development

Answer 57

trade liberalisation changes of government subsidies changing of exchange rate systems privatisation development of human capital protectionism infrastructure development industrialisation development of tourism / primary industry aid debt relief

Question 58

barriers to growth and development

Answer 58

primary product dependency foreign currency gap capital flight demographic factors debt access to credit and banking infrastructure education/skills absence of property rights corruption poor governance / civil war vulnerability to external shocks