Additional Revenue; FDI creates jobs; Wider markets to sell to; Allows countries to specialise; Economies of Scale
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How can Exports hinder Economic Growth
Product Primary dependency; Increased competition for domestic companies; Competition reduces price level, causing GDP to fall.
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Types of FDI
Setting up direct operations; Joint ventures; Acquisitions (when one company buys another/a piece of a foreign company).
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Benefits of FDI to the company
Access to new market; Increased revenue streams; Lower cost labour; Possible profitable Government incentives; Close to raw material; Avoids import tariffs.
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Benefits to the country who receives the FDI
Technology and Skills spill-over; Jobs; Training/education; Higher incomes; Higher government revenues.
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Disadvantages of FDI
Company: Legal, cultural and language barriers; Transportation costs; Quality of products. Country: Local businesses may suffer from competition and staff loss.
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Key Benefits of International Trade
Export revenues and jobs reduce poverty; Lower prices for consumers; New technology raises productivity; Gain of skills; Economies of scale
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Drawbacks of International Trade
Transport costs; Structural unemployment; Rising inequality; Pressure on wages and working conditions; More at risk from the global economy.
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Two Main Flows of FDI
Inward: foreign companies investing into the UK. Outward: A domestic company invests into another country.
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Benefits of Free Trade
Countries benefit from comparative advantage; businesses achieve economies of scale; Encourages competition and efficiency; Enables business growth.
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Tariffs
A tax that raises the price of imported products.
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Subsidy
A payment to encourage domestic production by lowering their costs.
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Import Quotas
Volume limits on the level of imports allowed or a limit on the value of imports at a given time period.
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Import Licensing
Where governments grant importers the license to import goods.
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Exchange Controls
This involves limiting currencies that can move between countries.
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Intellectual Property Laws
E.g. Patents and Copyright
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Technical Barriers to Trade
These include labelling rules and sanitary standards that increase product compliance costs.
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Advantages of Protectionism
Help new industries start up; Protection of certain industries that are strategic to the country; Protection against dumping (predatory pricing from exporters); Improves BOP; Raise tax revenue; Prevent entry of harmful goods.
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Disadvantages of Protectionism
Higher prices for consumers; Retaliation from other countries; Extra costs for exporters.
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Embargoes
A country banning a certain product.
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Globalisation
When different countries enter a global network of trade, communication, immigration and transportation.
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Causes of Globalisation
Reduction of Trade Barriers; Political Change; Reduced transport and communication costs; Increased FDI; Migration; Growth of the labour force; Structural Change.
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Characteristics of Globalisation
Greater Trade; An increase in FDI from TNCs; Development of Global brands; Greater use of offshoring and outsourcing; High levels of migration; Increased spending on capital investment; Developing countries growing rapidly.
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Benefits of Globalisation
Encourages businesses to benefit from division of labour and economies of scale; Markets become more competitive; Higher incomes; Gains from sharing skills and technology; Increased social awareness.
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Drawbacks of Globalisation
Inequality; Inflation (Rising prices); Vulnerability to external shocks; Threaten environments; Unemployment; Loss of culture.
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Trade Bloc
A group of countries that have signed an agreement to reduce or eliminate trade barriers.
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Free Trade Area
When two or more countries in a region agree to eliminate trade barriers.
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Customs Union
The removal of tariffs between members, plus the acceptance of a common external tariff against non-members.
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Common Market
When member countries trade freely in all economic resources.
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Economic Union
The same as a common market, except it also has its own shared monetary policy and currency (e.g. the Eurozone)
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Other cards in this set
Card 2
Front
Product Primary dependency; Increased competition for domestic companies; Competition reduces price level, causing GDP to fall.
Back
How can Exports hinder Economic Growth
Card 3
Front
Setting up direct operations; Joint ventures; Acquisitions (when one company buys another/a piece of a foreign company).
Back
Card 4
Front
Access to new market; Increased revenue streams; Lower cost labour; Possible profitable Government incentives; Close to raw material; Avoids import tariffs.
Back
Card 5
Front
Technology and Skills spill-over; Jobs; Training/education; Higher incomes; Higher government revenues.
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