1. define Globalisation the process through which nation- al economies, societies and cultures are becoming increasingly intercon- nected through global
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[Show More] networks of trade, communication, transportation and immigration 2. where are levels of globalisation the highest 3. where are levels of globalisation the lowest 4. 3 Key Characteristics of Globalisa- tion between core countries, as a result of them having sorted out major do- mestic problems, giving them spare capacity to look to solve international issues in countries participating in conflict 1) increasing global capital flows 2) global supply chains 3) high levels of international labour migration 5. 4 causes of globalisation 1) containerisation 2) trade agreements 3) activity of TNCs 4) technological advances 6. define 'Containerisation' the use of the same container size and format worldwide, increasing the efficiency of international logistics 7. 2 reasons of an increase in TNC ac- tivities 8. 2 examples of technological ad- vances facilitating globalisation 9. main aim of the WTO 1) global logistics systems 2) global flows of capital 1) development of Boeing 747 in the 1960s making air travel cheaper, in- creasing migration 2) development of World Wide Web in 1989 allowing for information transfers lowering barriers to trade to increase global economic integration 10. 2 activities of the WTO 1) settling trade disputes 2) reducing barriers to trade 11. example of the WTO reducing barri- ers to trade 12. define a Free Trade Area (eg. NAF- TA) 13. 5 steps of economic integration, in order of increasing integration 14. define a Customs Union (eg. EU Customs Union) 1986 Uruguay Round reduced barri- ers to the trade of manufactured in- dustrial goods an agreement between countries to liberalise trade between them, remov- ing all internal barriers to trade 1) free trade area 2) customs union 3) single market 4) monetary union 5) economic union countries that agree to abolish tar- iffs between member nations, but also adopt a common external tariff on im- ports from non-member countries 15. define a Single Market (eg. ASEAN) integration between countries allow- ing for the free movement of labour, goods and services and capital be- tween them 16. define a Monetary Union (eg. the Eurozone) 17. define an Economic Union (eg. the EU) 18. how does Outsourcing increase in- equalities? when countries establish a common currency they all use, along with using common monetary policy when countries coordinate similar fis- cal and economic policies between them TNCs operating in developing coun- tries pay wages 40% higher than local 19. why are inequalities increasing from Globalisation as a result of in- vestment? firms, creating inequalities in compar- ison to unskilled workers who don't have access to threse jobs globalisation promotes economic growth, which those who can afford to invest benefit the most from 20. 2 threats to Globalisation 1) high profile trade wars 2) shift towards managed-floating ex- change rates 21. example of a Trade War USA & China in the steel industry, with the USA placing a 25% tariff on im- ports of Chinese steel 22. 3 Benefits of Globalisation for LESS-DEVELOPED countries 23. 3 Costs of Globalisation for LESS-DEVELOPED countries 24. 3 Benefits of Globalisation for MORE-DEVELOPED Countries 25. 3 Costs of Globalisation for MORE-DEVELOPED countries 26. define a Transnational Corporation (TNC) 27. outline the Spatial Organisation of a TNC 1) inflow of FDI 2) job creation from TNCs 3) remittances 1) loss of small-scale local businesses 2) environmental degradation 3) exploitation of workers 1) reduced prices for consumers 2) higher profits for TNCs 3) inflows of skilled labour 1) high levels of structural unemploy- ment 2) slower rates of economic growth 3) increased financial volatility a company that operates in more than one country The HQ and R&D sector of the organi- sation are typically based in an MEDC where there is an abundance of skilled labour, whilst production is located in 28. 4 benefits of a firm operating as a TNC LEDCs where costs of production are lower 1) can escape tariffs 2) reduce production costs 3) reach foreign markets more effec- tively 4) to increase access to natural re- sources 29. define Vertical Integration when TNCs own their entire supply chain, giving them a significant level of control throughout the entire industry 30. define Horizontal Integration when a TNC has sufficient profits to takeover competitors in its industry, possible growing its market share into becoming a monopoly power 31. 3 reasons TNCs are so powerful 1) economies of scale 2) their stability attracts substantial in- vestment 3) vertical/horizontal integration 32. 2 benefits of TNC operations on MORE-DEVELOPED economies 33. 2 negative impacts of TNC op- erations on MORE-DEVELOPED economies 34. 2 benefits of TNC operations on LESS-DEVELOPED economies 35. 2 negative impacts of TNC op- erations on LESS-DEVELOPED economies 1) profit repatriation 2) reduced consumer prices 1) increased unemployment 2) investment going abroad (leakage to circular flow) 1) inflows of FDI 2) creates jobs 1) factor resource exploitation 2) growing income inequality 36. define Absolute Advantage when fewer factors of production are needed to produce the same amount of goods, making production costs lower than in other economies 37. define Comparative Advantage when a country can produce goods at a lower opportunity cost than other nations 38. define Opportunity Cost the value of the next best option for- gone when an economic decision is made 39. what does the 'Theory of Compara- tive Advantage' suggest? 40. 3 criticisms of the Comparative Ad- vantage concept 41. What Determines if a Country has a Comparative Advantage? 42. example of a Comparative Advan- tage (Ghana) 43. how does Comparative Advantage Specialisation & Trade affect the PPF? that it is mutually beneficial for coun- tries to specialise in the good they have a comparative advantage in, and trade with one another for all other goods 1) transportation costs not considered 2) assumes no import controls 3) ignores risk of a lack of diversifica- tion from specialisation Quantity and Quality of factors of pro- duction, and how relevant they are to a given industry will determine what good a given nation will have a com- parative advantage in Ghana may have a comparative ad- vantage in the production of cotton, as they have an abundance of fertile soil to produce cotton plants allows economies to consume beyond their individual PPFs 44. define Free Trade trade between countries with the ab- sence of protectionist measures, such as tariffs, quotas or red tape 45. 3 benefits of Free Trade 1) low consumer prices 2) increased consumer choice 3) economic growth from increased exports 46. define Protectionist Policies policies that aim to protect domestic industries against foreign competition, by placing restrictions on imports from foreign competitors 47. 3 main Protectionist Policies 1) tariffs 2) import quotas 3) export subsidies 48. 4 reasons for protectionism 1) protect infant industry 2) prevent 'Dumping' 3) protect domestic employment 4) reduce current account deficit 49. give an example of a Tariff as a pro- tectionist measure the United States has a 25% import tariff on imports of steel from the UK 50. define a Tariff a tax imposed by one country on im- ports from another country, paid by the importer 51. 2 key effects when analysing the impacts of Protectionist measures on the Quantity Demanded 52. example of an Import Quota as a protectionist measure 1) income effect 2) substitution effect NZ is allowed to import 230,000 tonnes of sheep and goat meat per year into the EU 53. define an Import Quota a physical restriction on the volume of imports of a particular good or service into an economy 54. 54. example of an Export Subsidy as a protectionist measure the Indian Govt pays domestic sugar producers 4000 rupees per ton of raw sugar they export to the global market 55. define an Export Subsidy a payment given to domestic produc- ers for them to reduce costs of produc- tion, and become more internationally price competitive 56. what happens to the Market Price as a result of an export subsidy 57. 3 disadvantages of the use of Pro- tectionist Measues the market price does NOT change, although the effective price producers are getting increases 1) risk of retaliation 2) loss of world efficiency by taking production away from producers with the comparative advantage 3) protectionism increases cost of im- ported raw materials 58. define Trade Creation the movement from a high cost do- mestic producer to a low cost produc- er inside the customs union 59. define Trade Diversion the movement from a low cost foreign producer to a high cost producer with- in the customs union 60. why does Trade Diversion occur? as a result of joining a customs union requiring members to impose a com- mon external tariff on non-members, which may hold the comparative ad- vantage 61. define the Balance of Payments a record of all financial transactions between the UK and the rest of the world within a given period of time 62. what does the Balance of Payments always = ? 63. 3 components of the Balance of Payments 64. what does the Current Account measure? 65. 4 components of the Current Ac- count 66. define the Primary Income section of the current account 67. 2 examples of items in the Primary Income section of the current ac- count 68. define Secondary Income as a component of the current account 69. 2 examples of items on the Sec- ondary Income section on the cur- rent account 70. what does the Financial Account measure? 71. 4 components of the Financial Ac- count will always equal 0 (always balanced), a surplus on one account will always be counteracted by a deficit in another Current, Financial, Capital the difference in value between a country's exports and imports visible trade, invisible trade, primary income, secondary income a measure of the money going in/out of a country as a result of trade or employment 1) interest from deposits in foreign banks 2) salaries paid to UK residents work- ing abroad movement of money between coun- tries which is not paying for goods/ser- vices and is not the result of invest- ment 1) spending on international aid 2) migrant remittances the value of the buying and selling of assets and liabilities between coun- tries 1) portfolio investment 2) FDI 3) banking flows 4) reserves 72. where is income from the Financial Account (eg. interest) recorded in the BofP 73. what does the Capital Account measure 74. 2 examples of items on the Capital Account 75. 3 factors determining whether a Current Account is in deficit or sur- plus 76. 3 consequences of a Current Ac- count SURPLUS 77. 3 consequences of a Current Ac- count DEFICIT 78. 4 Policies to Reduce a Current Ac- count Deficit 79. define Expenditure Reducing Poli- cies 80. 2 examples of Expenditure Reduc- ing policies to correct a Current Ac- count DEFICIT the Current Account all monetary transactions between countries 1) buying of fixed assets such as land/property abroad 2) transfer of financial assets by mi- grants 1) relative inflation 2) relative productivity 3) exchange rate strength 1) ER appreciation 2) accumulation of foreign exchange reserves 3) financial account surplus 1) financial account surplus increases debt burden 2) fall in AD increases cyclical unem- ployment 3) ER depreciation 1) expenditure reducing policies 2) protectionism 3) weaker ER 4) SSPs to boost competitiveness policies that aim to reduce the amount of spending on imports in the econo- my 1) contractionary fiscal through in- creased taxation 2) contractionary monetary through increased IR 81. define Expenditure Switching Poli- cies 82. 2 examples of Expenditure Switch- ing Policies to reduce a Current Ac- count deficit 83. what will be the most effective pol- icy at reducing a Current Account DEFICIT? policies that guide consumption to- wards domestic goods rather than im- ported goods 1) protectionism 2) artificially weakening the exchange rate the policy that specifically targets the main cause of the current account deficit 84. define Exchange Rates the value of one currency in terms of another currency 85. how is the external value of a cur- rency set in a Free-Floating Ex- change Rate system? 86. difference between Free-Floating and Managed-Floating Exchange Rate systems 87. what are exchange rate fluctua- tions called in a Free-Floating sys- tem 88. 3 Benefits of a Free-Floating Ex- change Rate system 89. 3 Disadvantages of using a Free-Floating Exchange Rate Sys- tem by market forces, with supply and de- mand driving the external value In a period of crisis, it is possible the central bank may intervene to either buy to support a currency, or sell to weaken a currency appreciations/ depreciations 1) automatically corrects a CA deficit 2) no need for central bank to hold foreign currency reserves 3) freedom to change IR for domestic policy 1) causes instability which deters FDI 2) can increase speculation 3) J-Curve suggests it won't neces- sary correct a CA deficit 90. how is the external value of a cur- rency determined in a Fixed Ex- change Rate system 91. how does the Central Bank uphold the 'peg' in a fixed exchange rate system? 92. what are fluctuations called in a Fixed Exchange Rate System 93. 2 countries a Fixed Exchange Rate is used 94. when will the Exchange Rate change in a Fixed ER system? 95. 3 pros of using a Fixed Exchange Rate system 96. 3 cons of using a Fixed Exchange Rate system 97. Outline the Process in which a CA deficit automatically corrects un- der a free-floating ER system the central bank fixes the currency value, with the external value being pegged to one or more currencies through buying and selling foreign ex- change reserves revaluations/devaluations 1) Saudi Arabia 2) Qatar when the peg is adjusted by the cen- tral bank 1) increased cost certainty for im- porters of raw materials 2) prevents speculation, increasing stability 3) promotes increases in productivity as exchange rate cannot be manipu- lated to make firms competitive 1) costly as forced to hold substantial foreign exchange reserves 2) country becomes uncompetitive if rate set too high 3) loss of control of interest rates to meet domestic objectives 1) deficit means import value exceeds exports 2) means less people buying the pound and more selling 3) deprecates ER 4) WPIDEC causes an increase in trade competitiveness, reducing the deficit 98. what determines the ability of a de- preciation to reduce the current ac- count deficit whether the Marshall Lerner Condi- tion is fulfilled (J-Curve) 99. state the Marshall Lerner Condition a currency depreciation will only cor- rect a current account deficit if the sum of the price elasticities of demand for imports and exports is greater than 1 100. according to the MLC, why is the PED for imports and exports in- elastic in the short-term 101. what diagram illustrates the Mar- shall-Lerner Condition 1) firms take time to adjust to imports being more expensive, as are locked into contracts with suppliers 2) foreign countries buying exports take time to realise goods are cheaper the J-Curve 102. what are the axis' of the J-Curve Current Account Balance (£) on y-axis, Time on the x-axis 103. define International Competitive- ness the ability of a nation to compete suc- cessfully overseas and sustain im- provements in living standards and output 104. 3 measures of Competitiveness 1) Unit Labour Costs (ULC) 2) Global Competitiveness Index (GCI) 3) Terms of Trade (TOT) 105. 5 factors determining competitive- ness (price, non-price, ability to at- tract FDI) 106. 106. 1) Unit Labour Costs 2) Labour Skill 3) Regulation 4) Infrastructure 5) Tax Regimes 3 determinants of whether a coun- try is 'Competitive' 107. what type of policies are used to increase International Competitive- ness? 108. 3 examples of Supply-Side policies to increase international competi- tiveness 1) price competitiveness 2) non-price competitiveness (innova- tion, quality etc) 3) ability to attract factors of produc- tion FDI Supply-Side Policies 1) govt spending on education/infra- structure 2) deregulation 3) tax incentives 109. who does UK hold the biggest trade Germany DEFICIT with? 110. who does the UK hold the biggest trade SURPLUS with? 111. why does the UK most commonly engage in regional trade? 112. example of the UK engaging in re- gional trade the USA reduces transport costs, reducing consumer prices trade with Ireland exceeds the value of trade with Italy, even though Ireland's economy is smaller 113. define 'Pattern of Trade' the geographical distribution of economies a country trades with, in- cluding the general volume of trade flows along with the relevant balance of trade 114. 3 Factors affecting the UK's pattern 1) leaving the EU trade union (Brexit) of trade 2) globalisation increasing imports from developing countries 3) economic development increasing climate change legislation, making UK goods less price competitive 115. 3) reasons for International Capital Flows 116. example of UK climate change legislation increasing production costs 117. 2 Benefits of International Capital Flows 118. 2 Disadvantages of International Capital Flows 1) flows of finance for trade 2) FDI flows 3) hot money flows to receive higher rates of return in 2023, the carbon tax in the UK stands at £83 for each tonne of carbon dioxide emitted 1) facilitates growth in world trade 2) fills the savings gap in developing countries 1) increase credit availability may cause govts and firms to overborrow 2) increases vulnerability of the do- mestic financial sector to events abroad [Show Less]