Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

National 5: Economics > Unit 3 - Global Economic Activity > Flashcards

Unit 3 - Global Economic Activity Flashcards

1
Q

Multinational

A

A multinational company/enterprise (MNC/MNE) is one that operates in more than one country. It has a headquarters in one country and branches or production facilities located worldwide.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

MNC - Example

A

Apple Inc. - Headquarters in San Francisco, CA. Manufacturing facilities in China

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

MNC - Reasons for locating

A

Access to resources - natural resources or cheap labour
Quality of resources - e.g. highly skilled labour
Proximity to market
English speaking (in the case of the UK)
Access to EU - now in jeopardy
Grants offered by governments
Transport links - ports/roads/rail/airports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

MNC - Advantages to host country

A 
Jobs are created - unemployment reduced
Increased exports
Benefits to related businesses/suppliers
Increased tax revenue for government
Reduced benefit payments
May bring ideas and innovations that can be used by other firms
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

MNC - Disadvantages to host country

A

Negative impact on competing firms
External costs - pollution, traffic congestion etc
Repatriation of profits to home country
The MNC may leave
Cost of government incentives
MNC may only provide low paid “screwdriver” jobs
Senior positions may be brought in from home country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Exchange Rate

A

The value of one currency in terms of another

e.g. £1 = $1.26

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Exchange Rates - Appreciation

A

An increase in the value of a currency

e.g. £1 = $1.26 becomes £1 = $1.50

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Exchange Rates - Depreciation

A

A decrease in the value of a currency

e.g. £1 = $1.50 becomes £1 = $1.26

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Determinants of Exchange Rates

A 
FOREX Market : Factors affecting supply and demand
UK unemployment
FTSE Market Trends
Economic Growth
Speculation
Interest Rates
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Appreciation Impacts - Individuals

A

Stronger £1 buys you more foreign currency
Increases a UK citizen’s purchasing power abroad
Cheaper to import goods from abroad
Cheaper to go abroad on holiday

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Appreciation Impacts - Firms

A

If the firm exports, then demand for exports will fall
If the firm imports raw materials and components for production, then it is cheaper - and this represents a fall in the costs of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Appreciation Impacts - Economy

A

Imports will increase - meaning a worsening of the current account deficit
Exporters will lay off workers
Importers can reduce prices so inflation may fall

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Depreciation Impacts - Individuals

A

Weaker £1 buys you less foreign currency
Decreases a UK citizen’s purchasing power abroad
Dearer to import goods from abroad
Dearer to go abroad on holiday

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Depreciation Impacts - Firms

A

If the firm exports, then demand for exports will rise
If the firm imports raw materials and components for production, then it is dearer - and this represents a rise in the costs of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Depreciation Impacts - Economy

A

Exports will increase - meaning a reduction of the current account deficit (or a surplus)
Importers may lay off worker due to an increase in the costs of production
Inflation may rise because importers increase prices to protect their profit margins

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Features of the EU - Single Market

A

There are no trade barriers between the 27 member countries

27 after Brexit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Features of the EU - Shengen

A

Workers can move freely to work in other EU countries. Also there is free movement of capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Features of the EU - Common External Tariff

A

All goods imported to any country in the EU (from outside) face the same tariff

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Features of the EU - Maastricht

A

Set workers rights - for example there is a maximum number of hours workers can work for each week

20
Q

EU - Reasons for trading

A

Proximity
Culture
Single Market
Demand

21
Q

Eurozone - Features

A

Countries which use the euro as their currency
Currently 19 member countries
They all have a common monetary policy
The interest rate is set by the European Central Bank

22
Q

Global (Free) Trade - Advantages

A

Allows countries to benefit from specialisation
Increases consumer choice
Increases competition - and therefore efficiency
Creates additional business opportunities
Enables firms to benefit from the best workforces, resources and technologies from anywhere in the world

23
Q

Global (Free) Trade - Disadvantages

A

Protectionism :
International trade with low cost economies is threatening jobs in many developed economies and reducing opportunities for growth in less-developed economies
Contributing to rapid resource depletion and climate change
May increase the exploitation of workers and the environment
May be increasing the gap between the rich and the poor countries

24
Q

Trade Barriers

A

Import Quota - Limit on amount
Import Tariff - Indirect Tax on imports
Higher Standards - e.g. stricter health and safety regulations)
Campaigns to buy local goods
Subsidies - protects infant industries so they can go on to compete with MNCs
Embargoes - complete ban on imports from another country

25
Developing Countries/Economics - Characteristics
``` Low GDP per capita Lack of human capital Lack of investment in infrastructure Lack of education and training Dependency on agricultural products Reliance on on or two exports High unemployment Poor level of healthcare ```
26
Aid to Developing Economies
Free trade - e.g. reduce trade barriers Debt relief - allowing non-repayment of debt interest Capital equipment - providing machinery Tied Aid - Giving cash provided it is used to buy UK exports Technical expertise - provide people who can help e.g. with engineering projects Education - provide teachers, books etc Military Aid - provide equipment and personnel Emergency Aid - e.g. provide food in a drought or flood
27
NIC (Emerging Economy)
``` Newly Industrialised Country : i.e. BRICMINT Brazil Russia India China Mexico Indonesia Nigeria Turkey ```
28
NICs - Characteristics
``` High level of foreign direct investment Availability of cheap labour Moving from primary to secondary industry High Levels of Exports High Rates of Economic Growth Increased Infrastructure Increased levels of education Reduced poverty and higher living standards Favourable tax and regulatory regimes Improved Healthcare ```
29
UK Main Exports
Machinery (including computers) Vehicles Pharmaceuticals
30
UK Main Imports
Cars Transportation Textiles
31
UK Export Partners
Europe - Germany and Switzerland United States Asia - China
32
UK Import Partners
Europe - Germany and France Asia - China United States
33
Eurozone Membership - Advantages
Reduce risk of trading (Exchange rate does not fluctuate) No transaction costs so increased investment Price transparency - easier to compare prices Could increase (or at least protect) FDI in Scotland Could lead to low inflation and increased competitiveness
34
Eurozone Membership - Disadvantages
Monetary policy committee no longer able to set interest rates Interest rate said by European Central bank might not suit every country - e.g. UK has higher percentage of variable rate mortgage holders Cost of changing over to the Euro is very high i.e. High menu costs
35
EU Membership - Disadvantages
Contribution to EU Budget - Membership Fee (eg 2016 UK fee was £13.1bn) Lack of Control - eg Tariffs and Migration policies may not suit every country Competition for U.K. Firms Lower wage economies
36
EU Membership - Advantages
Unrestricted movement of goods, services and labour among countries Greater consumer choice Greater competition encourages efficiency Bigger market for exporters More employment opportunities Cheaper supplies Economic Growth encouraged
37
Trade Barriers - Reasons for Imposing
To protect domestic industries from foreign competition - to safeguard domestic output and employment To correct a significant deficit on the balance of payments - restricting imports should reduce the value of imports in relation to the value of exports, thereby restoring balance To protect infant industries from foreign competition - giving them time to become established To protect strategic industries such as agriculture - needed in countries, especially in times of war or disasters To preserve health and safety within a country (Or to preserve particular species or the environment)
38
World Bank - Low income
$1035 or less per person
39
World Bank - Lower middle income
$1036 to $4085 per person
40
World Bank - Upper middle income
$4086 to $12615 per person
41
World Bank - High income
$12616 or more per person
42
Developing Economies - Examples
Afghanistan Sierra Leone Chad Cambodia
43
EU Enlargement - Advantages
Addition of labour and land should boost economic growth and create new jobs Lower wage costs in new member states provides opportunities for firms to cut costs by relocating their operations UK skill shortages could be reduced by an inflow of labour from Eastern Europe
44
EU Enlargement - Disadvantages
Jobs may be lost if firms relocate to take advantage of the lower wage costs in the new entrant countries A sudden influx of labour from Eastern Europe could dampen wage growth All the new entrants have living standards below the EU average so the distribution of new regional funds will be altered in favour of new entrants The UK (and particularly Scotland) will not only receive less regional aid, it may also lose its rebate
45
EU Enlargement
When new economies/countries join the European Union e.g. Most recent member is Croatia

National 5: Economics (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions