Economics Section D Part 1

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What is globalisation?
The growing integration and interdependence of the world's economies.
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What are the characteristics of globalisation?
G&S traded freely across borders (no gov restrictions to prevent trading); people largely able to live and work where they choose; high level of interdependence between nations; capital can flow freely (shares can be bought in foreign companies).
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What are the reasons for globalisation?
Rapid ICT development, widespread deregulation e.g. privatisation, improvements in international transport, MNC development and tourism growth.
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What must governments not do in order to promote globalisation?
No international border closing, not protectionist policies, no planning permission denial overseas.
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What are MNCs?
Multi-national companies- large and powerful firms that sell G&S in global markets and own production plants etc across the world.
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Why do MNCs exist?
EoS- produce more than those in domestic markets; marketing- strong established brand, heavy advertising and patents; take risks, diversify; technical & financial superiority- comlex tech, knowledge banks, can afford R&D.
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What is FDI?
Foreign direct investment- companies investing in a foreign country, also the purchase of foreign shares. Most is done by MNCs.
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How do governments encourage FDI?
Offer tax breaks, subsidies, grants and low-interest loans; relax regulations; invest in infrastructure; invest in education so locals can work for foreign MNCs.
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What is development aid? What is its purpose?
Money and assistance given to developing countries by govs in developed countries. To help long term development (not humanitarian aid which is for short term problems).
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What projects does development aid include?
Clean water and healthcare, education and training, agricultural e.g. irrigation, land reclamation, infrastructure development, technology access.
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What types of development aid are there?
Bilateral and multilateral; government grants; low/ zero interest loan; ties aid (e.g. to trade)
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What do both FDI and development aid do?
Aid globalisation- money and employment received promotes economic growth. As countries are less poor- markets for MNCs.
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What are the benefits of globalisation to developed countries?
Higher MNC profits, often repatriated; higher income, output and employment; lower prices (more comp); increase in labour supply (freedom of movement); greater choice (imports/exports); conflict threat reduced as more cooperation.
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What are the benefits of globalisation to developing countries?
Increase in GDP and living standards, increase in tax revenue, exports & employment, new technologies and working practices, improved human capital (on the job learning), more enterprise development (local MNC suppliers), reduction in 3rd world debt.
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What are the disadvantages of globalisation?
Environmental damage- greenhouse effect, non-renewable resource use; exploitation- low wages, profit send to MNC country, lower tax paid, out-compete local firms; higher commodity prices inc essential food; interdependence- events affect others.
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What is the development gap?
Gap between rich and poor countries.
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What should globalisation do to the development gap?
As it causes growth and development and poor countries have greater potential for growth, gap should shrink.
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What happens in reality?
Sometimes it is true, e.g. China; other times not, e.g. sub-Saharan Africa. Developed nations may benefit more as they have the resources to exploit globalisation.
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What is footloose capitalism?
MNCs lack accountability- can abuse ability to move from country to country. Can use threat of moving to pressurise govs. if do leave, leave unemployment etc.
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What can globalisation do to commodity prices?
Developing countries can be prone to fluctuations. Subsidies can have an effect on world prices, as countries are interconnected.
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What are the effects of debt for developing countries?
Money diverted from other services. Prevents SoL rising. HIPC- heavily indebted poor country.
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Card 2

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What are the characteristics of globalisation?

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G&S traded freely across borders (no gov restrictions to prevent trading); people largely able to live and work where they choose; high level of interdependence between nations; capital can flow freely (shares can be bought in foreign companies).

Card 3

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What are the reasons for globalisation?

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Card 4

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What must governments not do in order to promote globalisation?

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Card 5

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What are MNCs?

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