APT Global Economy Extract 1

What is meant by the term 'globalistion'

• 2 marks
• national economies 
• becoming increasingly intergrated
• and interdependent 

What is meant by the 'Foreign Direct Investment'?

• 2 marks 
• spending by multinational corporations 
• in physical capital
• in overseas operations 

What is meant by the term 'trade barrier'?

• 2 marks 
• obstacle 
• restricts trade between nations 
  • tarrifs
  • quotas 
  • domestic subsidies 
  • administration barriers
  • red tape
  • product standards 

What is meant by the term 'protectionalism'?

• 2 marks
• protection of domestic industries 
• from foreign competition 
• involves errection of trade barries 

Other than global trade, foreign direct investment and migration flows, state and explain two indicators of globalisation

• 4 marks 

1. Number of global brands - 

• similar products sold under same name 
• reflects global intergrated naure of the world economy 

2. Transfer of technology - 

• technology developed in one country made avaliable in other countries 
• due to multinational corporation investment and licence technology 
• clear indication of increasingly intergrated nature of the global economy 

3. Growth in size of the internet 

• improved efficiency of communication 
• improved buying and selling of goods and services 
• allows for greater integrtion of nations 

Describe what is meant by 'globalisation'?

• 4 marks

1. Define Globalisation - 

• national economies
• become increasingly integrated 
• and interdependent

2. Description - 

• Value of trade in goods and services as a % of world GDP increasing - countries becoming more integrated 
• FDI as a % of world GDP increased six fold since 1980. (FDI = invest by multinational corporations in physical capital
• Number of migrate workers trebbled since 1960's - instead of a national labour market, there's a global labour market

Analyse ( using a diagram) how reductions in trade barriers can increase the volume of world trade 

• 6 marks
  • Tarrif removed - world supply curve shifts downwards from Sw+Tarrif to Sw

• reduction in price from Pw+T o Pw
• reduction in price = contraction of domestic supply from Q1 to Q3 & extension of domestic demand from Q2 to Q4.
• volume of imports increased from Q1Q2 units to Q3Q4 units - more trade taken place. Exports and foreign suppliers and imports domestically. 
• tarrifs removed on goods and services where it has the comparaive advantage stimulates more exports and trade in these markets.

Analyse two factors that have driven the process of globalisation 

1. Trade liberalisation -

• trade between countries increased as trade as % of world GDP increasing = greater economic integration between countries 
• barriers to trade reduced = more trade = integration (increased exports and imports)

2. Fall in transport costs - 

• innovations and greater privatisation of transport costs across world.
• trade in form of shipping or air/road become cheaper and faster 
• promoting more global trade as a % of GDP
• FDI & migration flows increased with improvement in mobility of labour and capital
• cheaper & faster transport = insentive to trade = more global trade 

3. Technological advanacement - 

• internet improvements 
• international trade = more efficient&quicker&cheaper= opening up markets = increased world trade

Analyse two economic costs of globalisation 

• 6 marks

1. Growing income inequality - 

Cost - higher growth rates not translated into higher incomes 

Explanation - growth generated from capital sector not human sector

Consequesce - key macroobjective of fair income not met in developed & developing countries --> people living in absolue poverty.

2. Structural Unemployment - 

Cost - greater global competition 

Explanation - major or infant industries going into decline or struggling to compete internationally 

Consequence - macroeconomic objective of low unemployment not met, Gov. have to deal with high unemployment,pay more benefits, reducion in tax revenue, pay for training schemes - rise in poverty & lower living standards 

Analyse two economic benefits of globalisation 

1. Higher rates of GDP Growth

Benefit - access to a greater market 

Explanation - greater potential for countries to exploit their comparative advantage  - specialisation maximises potential revenue from exports

Consequence - X-m in AD increase, increasing economic growth & incomes. Unemployment decreases as labour is a derived demand and firms will respond to increased growth and demand by hiering more workers  increasing workforce - reducing unemployment - increasing incomes - increased living standards and prosperity

2. increased competition and lower prices 

Benefit - countries reduce trade barriers and agree to trade with one another

Explanaion - overall market size increases - many new firms in market, competition is now between various countries not just domestically 

Consequence - customers get lower prices, higher quality, higher quantity, greater choice, increased customer welfair, promoting allocative efficiency - resources follow customer demand