APT Global Economy Extract 1

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  • Created by: Azzab123
  • Created on: 05-05-16 10:13


What is meant by the term 'globalistion'

  • 2 marks
  • national economies 
  • becoming increasingly intergrated
  • and interdependent 
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What is meant by the 'Foreign Direct Investment'?

  • 2 marks 
  • spending by multinational corporations 
  • in physical capital
  • in overseas operations 
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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 
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What is meant by the term 'protectionalism'?

  • 2 marks
  • protection of domestic industries 
  • from foreign competition 
  • involves errection of trade barries 
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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 
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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
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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.
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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
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Analyse two economic costs of globalisation 

  • 6 marks

1. Growing income inequality - 

Cost - higher growth rates not translated into higher incomes 

Explanationgrowth 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 

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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 

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