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Globalisation ­ an expansion of world trade in goods and services leading to greater international
interdependence.

What has led to globalisation?

Transport
Technology (eg communication)
Rising real living standards
Decline in protection
Economies of scale

Benefits

Low inflation
Sustained economic growth
High levels of FDI
Rising productivity
Helped to sell…

Page 2

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Specialisation ­ being better than another country at providing a good or service, in terms of the
quantity of output and lower cost.

Absolute advantage ­ when a country is able to provide a good or service using fewer resources
and at a lower cost than another country.

International trade…

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Regulations ­ trying to limit imports through variety of rules (eg cars have to have lights on
in Sweden)

Costs of BRICS growing

Larger markets for UK exports
Cheaper imports

Benefits of BRICs growing

Loss of manufacturing jobs
Increase in global warming
Rising costs of raw materials

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Single market ­ the economies of different countries can be treated as one when a firm is
considering its domestic market

Customs union ­ a group of countries, such as the EU, have free trade between members, but a
common external barrier

Advantages of SM

Specialisation and economies of scale…

Page 5

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Current account ­ the balance of trade in goods and services plus net investment incomes from
overseas assets

Current account deficit ­ the value of imports exceeds the value of exports

Current account surplus ­ the value of exports exceeds the value of imports

Reasons for deficit

Loss of advantage…

Page 6

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Exchange rate ­ how much of one currency needs to be given up to buy one unit of another currency

Floating exchange rate ­ where the prices of two currencies are decided by market forces

Fixed exchange rate ­ where the central bank of a country tries to decide on…

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