Theme 4 Slatman

Question 1

How has globalisation impacted wages as a percentage of gdp

Answer 1

More migration so increased supply of labour
Growth of TNC’s
Reduces trade barriers so easier to base manufacturing in low- wage countries
Globalization increases competitiveness, which breeds income inequality and job relocation. Technological change has resulted in a widespread shift in labour demand, favouring skilled workers at the expense of less skilled ones.

Question 2

Impacts of globalisation on the global economy

Answer 2

• Increased global trade
• Increased global output with reference to comparative advantage
• Increased incomes in developing countries due to growth of export industries/investment from
MNCs
• Increased global competition between firms leading to lower prices for consumers globally
• Increased supply globally leading to less global inflationary pressures
• Growth of multinational corporations
• Increased migration reducing unemployment globally as people move to where jobs are available/where their skills are in need

Question 3

what is globalisation

Answer 3

the interdependence of world economies for trade.
this includes people, products and ideas

Question 4

why has globalisation come about

Answer 4

better transport systems
more free trade agreements
internet
capitalism. the pursuit of profit

Question 5

impact of globalisation on the uk

Answer 5

• worker employment and unemployment - employment rises as it is easier for migrants to enter work. lower skilled jobs worst
• worker wages -> higher skilled jobs avilable so workers demand a higher wage. although wages difficult to compete with indonesia for low skilled jobs
• consumer price and choice -> increased consumer choice as access to world and more innovation, lower price due to economies of scale
• producer specialisation-> specialise in higher quality goods
• environmental and social concerns
• increased producer footloose locations -> more firms move abroad

Question 6

impact of globalisation on producers

Answer 6

increased consumption to more revenue for reinvestment
economic growth so accelerator theory
more jobs available as demand for jobs increases
increased incentive to reduce costs to remain competitive

Question 7

what is the chinese belt and road initiative

Answer 7

a large infrastructure programme that connects china to the rest of the world

Question 8

why are the chinese doing the belt and road initiative
and evaluate

Answer 8

spur economic growth
improve international relations
to have global influence
ease of tranpsport to improve efficiency
eval: opp cost

Question 9

what is terms of trade

Answer 9

tells you the amount of imports a country can buy for each unit of export

Question 10

what are imporvements in terms of trade

Answer 10

export prices increase relative to import prices

Question 11

what are deteriorations in terms of trade

Answer 11

when a countries import prices increase relative to its export prices

Question 12

how to work out terms of trade index

Answer 12

index of exports
––––––––––––––––– x100
index of imports

Question 13

what are trading blocs

Answer 13

trading blocs are created to encourage trading partners to buy and sell goods amongst its members
more favourable trading conditions are offered to its members
e.g EU

Question 14

what are the different types of trading bloc

Answer 14

free trade area
customs unions
common markets
economic union

Question 15

what is a free trade area

Answer 15

a group of countries that have agreed to mutually lower or eliminate trade barriers for trade within the area

Question 16

what is a customs union

Answer 16

A customs union is a type of trading bloc where member countries agree to eliminate tariffs and other trade barriers among themselves and adopt a common external tariff on goods imported from non-member countries

Question 17

what is a common market

Answer 17

an agreement between 2 or more countries removing all trade barriers between themselces and establishing tariff and non-tariff barriers for imports and also the free movement of the FACTORS OF PRODUCTION (CELL)

Question 18

whats an economic union

Answer 18

Same concept as a common market just by also coordinating economic policies, harmonizing monetary and fiscal policies, and often using a common currency

Question 19

benefits of a trading bloc

Answer 19

increase competition
provide new opportunities to trade (trade creation)
increased FDI
more workers available

Question 20

negatives of trading blocs

Answer 20

trade diversion - trading blocs distort world trade as countries trade with other countries based on whether they are in a trading bloc with them
makes it more expensive to trade with countries outside the tading bloc
increased interdependence on economic performance in other countries in the trading bloc

Question 21

why may globalisation not cause an increase in jobs

Answer 21

increased availability of technology to replace human work

Question 22

positives of being in the EU

Answer 22

trade creation - more trade opportunities
increased funding and investment
more job opportunities for citizens
economic growth
more negotiating power
increased competition so more innovation
incentive for producers to produce more as lower costs

Question 23

against being in the EU

Answer 23

• huge EU costs (yearly cohesion fund)
• increased migration into the country causing NHS, housing issues as well as causing unemployment due to over supply
• trade diversion
• loss of sovereignty - less power over making laws

Question 24

what is trade diversion

Answer 24

when a countries trade shifts from a more efficient producer to a less efficient producer due to a free trade agreement

Question 25

what are the different types of protectionism

Answer 25

tariffs quotas - limit on quantity embargos subsidies - investments into domestic markets admin and red tape

Question 26

reasons for tariffs

Answer 26

protect domestic goods protect new industry government tax revenue incentive for producers to produce more

Question 27

reasons against tariffs

Answer 27

damages global economy trade wars (retaliation) loss of economic welfare - higher prices and less choice / lower competition creates inefficient zombie firms Domestic inflation causing less exports For price inelastic products, demand won’t change so will only decrease disposable income in country

Question 28

benefits of quotas

Answer 28

increased variety benefits low income families still protecting domestic goods forces increased competition between firms can mean the quotaed country gives the Uk a quota in return, increasing exports

Question 29

disadvantages of quotas

Answer 29

domestic trade will still decrease trading with foreign countries is bad for sustainability

Question 30

what 4 things does the WTO do

Answer 30

• monitor the trade policies of its members • training to gov officials in developing countries to help them engage with other WTO members • settling disputes • setting rules and making sure members follow them

Question 31

what is the WTO

Answer 31

an international organisation that governs global trade. their main goal is to ensure trade in goods and services flows freely e.g stops big countries exploiting smaller countries by using tariffs

Question 32

beneifts of the WTO

Answer 32

promotes international trade lowers trade barriers for members so lower costs of production ensures members follow laws non discrimination pinciple

Question 33

negatives of the WTO

Answer 33

favours powerful countries as they have moe power within the WTO carbon emissions

Question 34

what is relative poverty

Answer 34

measures people who’s income is below 60% of the uk median incomes

Question 35

what is absolute poverty

Answer 35

measures people who’s income is below what is socially acceptable as a min living sandard ($2 a day)

Question 36

causes of poverty

Answer 36

geographical location lack of access to basic services (education, water, food) lack of employment opportunities lower economic growth in the area conflict rising rent costs if large firms dont move there as they need high skilled workers

Question 37

impacts of poverty

Answer 37

lower economic growth huge governemtn costs so opp cost higher inequality lower quality of life so dont live as long no entrepeneurship more crime Less productive labour

Question 38

ways of reducing poverty

Answer 38

increased government investment in the area subsidies for firms based there increased investment in training, healthcare and education attract FDI diversifying economy - not being primary product dependant Micro finance Debt relief Lewis model

Question 39

reasons for poverty in south sudan

Answer 39

food insecurity - has to import lots of items debt burden dependence on oil landlocked so no sea trade conflict

Question 40

conditions for the Harod Domar model to work (do flashcrads first)

Answer 40

a stable government confidence low interest rates profitable entrepeneurship

Question 41

how do you workout capital-output level

Answer 41

capital investment —————————- output increase

Question 42

what is warranted growth rate

Answer 42

this is the growth rate at which all saving is absorbed into investment

Question 43

harrod domar model strengths

Answer 43

encourages responsible lending

Question 44

harrod domar model weaknesses

Answer 44

opp cost for gov needs a stable gov corruption could have a low MPS

Question 45

what is primary product dependency

Answer 45

when a nation is over dependant on a primary product for economic output and government revenues

Question 46

why is something like oil a good exporter

Answer 46

inelastic as its a necessity when global economy improves, demnd increases

Question 47

nigeria size of oil sector and population

Answer 47

40% of GDP population : 230m

Question 48

positives of primary product dependancy

Answer 48

source of large government revenue attracts FDI creates jobs encourages supply side investment funds long term development (revenue can be reinvested into economy)

Question 49

why is primary product dependancy bad

Answer 49

• volatile prices - low prices drastically impacts economy • lack of whole economy investment (opp cost) undiverse economy • lack of entrepeneurship • Income from exports can rise if commodity prices rise and exports can decrease rapidly if commodity prices fall. This uncertainty may deter investment in that country. • underdeveloped infrastructure • can cause the dutch disease - the rapid development of one sector of the economy (particularly natural resources) precipitates a decline in other sectors

Question 50

what does the lorenz curve show

Answer 50

the graphical representation of income and welathh distribution

Question 51

what does a large gini coefficient show

Answer 51

greater inequality

Question 52

what is the lewis model

Answer 52

moving unproductive labour from rural areas into industrial/urban areas building an economy based on productive manufacturing and eventually moving to a service related economy

Question 53

positives of the lewis model

Answer 53

economic growth as more capital output positive multiplier as factory gets bigger and needing more workers grows cities reduced inequality

Question 54

negatives of the lewis model

Answer 54

difficult to move workers to city and expensive affects rural food supply creates urban inequality

Question 55

what is FDI

Answer 55

when a global firm sets up factories or makes ownership investment in another country

Question 56

how would a country attract FDI

Answer 56

offer subsidies and rax reliefs such as lower corp tax investment in healthcare and education - more productive workers

Question 57

how does FDI benefit an economy

Answer 57

increased tax revenue economic growth creates jobs directly and indirectly

Question 58

problems with FDI

Answer 58

using up domestic resources Negative effects on environment can reduce competitiveness in area overdependacy on firm - consequences if they leave often low paying jobs

Question 59

what is microfinance

Answer 59

the provision of small scale loans to promote enterprise the government facilitate th setting up of microfinance particularly targets women and low income people in rural areas lends small amounts to poor people who are ignored by conventional banks

Question 60

benefits of microfinance

Answer 60

encourages entrepeneurship allows consumers to have access to essentials increased investment helps reduce poverty incentive to pay loan back so works more

Question 61

problems with micro finance

Answer 61

higher interest rates than commercial banks can cause server long term debt may not use the money for entrepeneurship those who receive loans most likely dont have much business knowledge so may struggle to use it to make money

Question 62

benefits of tourism

Answer 62

jobs tax revenue diversifies economy attracts FDI increases spending so economic growth

Question 63

negatives of tourism

Answer 63

congestion pollution increased national debt seasonal infrastructue cost - opp cost so taxes will have to rise economic dependance - so huge impact on economy if demand changes

Question 64

How would increased transport links lead to an increase in economic growth in Africa

Answer 64

Encourages FDI Increased trade Lower costs and more productive

Question 65

reasons for providing aid

Answer 65

to build international relations to become trading partners for security for government that receive the aid - the gov receive the aid and spend money on the supply side to grow the economy

Question 66

reasons against aid

Answer 66

opp cost country becomes dependant on aid only a short term solution corruption - capital may not actually make it into economy

Question 67

when is debt considered unsustainable

Answer 67

considered unsustainable when the debt to exports ratio exceeds 200-250%

Question 68

what is debt relief

Answer 68

cancelling the debt of developing countries

Question 69

benefits of debt relief

Answer 69

stability poverty reduction taxes wont need to be as high less government revenue needing to be spent on interest payments so more can be spent on economy

Question 70

How do HIPC (heavily indebted poor countries) get debt relief

Answer 70

develop a poverty reduction strategy stable gov free of corruption face an unstable debt burden

Question 71

negatives of debt relief

Answer 71

confidence may decrease when debt relief stops debt relief programmes take a ling time country can become dependant

Question 72

Evaluate tourism as a method of growth and development

Answer 72

Job creation Attracts FDI Infrastructure development Positive multiplier as tourists spend in economy

Question 73

Causes of an increase in income inequality

Answer 73

Globalisation - higher wage competition for lower wage lower skilled job Regressive tax systems such as ad valorem Decreased unemployment benefits Increased unemployment

Question 74

Factors influencing patters of trade between countries

Answer 74

Exchange rate controls Trading blocs Protectionist policies Levels of FDI Competitiveness - Uk loss of manufacturing reducing competitiveness in these areas

Question 75

Factors affecting HDI

Answer 75

Life expectancy Education Standard of living

Question 76

Causes of a currency depreciation

Answer 76

Lower interest rates Speculation - if investors expect currency to fall, will remove investment, reducing demand for currency Gov debt - high levels of debt reduce investor confidence Political instability such as civil wars Trade deficit - greater supply of its currency in the foreign exchange market

Question 77

What is economic development

Answer 77

Economic development encompasses the sustainable improvement of a country's living standards, typically characterized by increases in life expectancy, education levels, and income. It's more than just economic growth; it also involves enhancing the quality of life and expanding individual freedoms. This includes increasing access to basic necessities like food and shelter, creating more job opportunities, and investing in education and healthcare.

Question 78

Why do developing economies see more economic growth than developed economies

Answer 78

Rapid population growth Increased FDI Improvements in infrastructure Developed economies often have ageing economies

Question 79

Explain the Dutch disease

Answer 79

1. Resource Discovery/Price Increase: A country discovers a significant natural resource (like oil or gas) or sees a sudden surge in the price of a resource it already exports. 2. Increased Inflow of Foreign Currency: The newfound resource generates substantial revenue, leading to a large influx of foreign currency into the country. 3. Currency Appreciation: The increased demand for the domestic currency drives its value up, also known as appreciation. 4. Negative Impact on Other Sectors: The appreciation of the currency makes the country's exports (particularly manufactured goods) more expensive and less competitive in global markets. 5. Potential for Deindustrialization: The decline in the competitiveness of manufacturing and other sectors can lead to a contraction of these industries and a shift towards a more resource-dependent economy

Question 80

Negatives of primary product dependency

Answer 80

Dutch disease Price volatility due to weather conditions for examples Limited diversification makes the economy more vulnerable to external shocks

Question 81

Positives of primary product dependency

Answer 81

Export earnings Employment Gov revenue

Question 82

Strategies to address primary product dependency

Answer 82

- Encourage diversification - Investment in education to have a more skilled workforce to encourage entrepreneurship or help the transition to a more diverse economy - infrastructure development - reduces costs in other sectors and encourages diversification

Question 83

Explain the role of financial markets

Answer 83

To lend to businesses and individuals To facilitate the exchange of goods and services To provide forward markets so firms can reduce the risk of fluctuating prices To facilitate saving so that consumers can save up for expensive items

Question 84

Impact of globalisation on GLOBAL economy

Answer 84

Increased global trade Increased incomes in developing countries due to the increase in exports Increased global competition between firms, decreasing prices for consumers Increased migration reducing unemployment globally as workers move to where jobs are available

Question 85

Impact of a high national debt on the exchange rate

Answer 85

High national debt can weaken a currency by making it less attractive to investors

Question 86

Benefits of a monetary union

Answer 86

Benefits: Elimination of exchange rate risk leading to more FDI - members avoid currency fluctuations Less vulnerable to external shocks Reduced transaction costs - elimination of currency exchange costs

Question 87

What is a monetary union

Answer 87

Countries which use a common currency like the eurozone

Question 88

Negatives of a monetary union

Answer 88

Loss of independent monetary policy - Individual countries cannot set their own interest rates or implement monetary policy tailored to their specific economic conditions. Reduces ability of exchange rate policy

Question 89

Why might a country impose import tariffs

Answer 89

Promote domestic consumption to develop domestic industry Increase tax revenue to reduce budget deficit Improve balance of payments

Question 90

Problems with primary product dependency

Answer 90

Fluctuating prices makes it harder for producers to plan their investments - discouraging investment Falling prices reduce profits for producers Fluctuating current account Changes will have a big impact on AD

Question 91

What is a foreign exchange gap

Answer 91

A foreign exchange (forex) gap occurs when a country's foreign currency earnings are insufficient to cover its foreign currency expenditures, like imports or debt servicing

Question 92

What are the reasons for differences in economic development

Answer 92

- harrod-domar savings gap: Developed countries have more savings than developing countries Due to their higher incomes, this means banks have less money to lend out to the developing economy which will reduce business investment, reducing the amount of capital in the economy - Harrod-domar foreign exchange gap: a lack of foreign reserves, makes it harder to import. For example, if there is a lack of foreign reserves such as US dollars, they can’t buy as much machinery with the US dollars. Another reason a foreign exchange gap harms economic development is that because they don’t have many foreign reserves, They don’t have many US dollars to pay off the debt so when their currency depreciates debt levels increase when you’re currency depreciates relative to USD - primary product dependency- less FDI as too volatile. Less business investment due to volatile prices.

Question 93

How would you reduce the savings gap 

Answer 93

Aid reduces the saving gap as the individuals are now given food and water and spends less of the limited incomes on this food and water and more can be saved. This will increase the lending ability of banks.

Question 94

How would a country reduce its foreign exchange gap?

Answer 94

Tourism - tourists spend their currency (e.g euros) in the economy increasing the amount of euros the country now has increasing the foreign reserves Debt reief

Question 95

What is moral hazard

Answer 95

If the government bailed out the banks during the financial crisis the more hazard would be that the banks now will take excessive risk as they know the bank of England will just bail them out