3.1 Globalisation

• Which 2 Asian countries have become leading economies thanks to globalisation?

  India and China
• How has the UK's economy changed since the advent of globalisation

  shifted from producing goods to offering services
• What is free trade

  occurs when countries trade with no protectionist measures such as tariffs, quotas and red tape
• Why have developing countries gained an advantage in the production of manufactured goods

  have fewer regulation and lower labour costs, meaning it is cheaper to produce goods, hence lower prices
• Define absolute advantage

  When country A can produce more units of output than country B with the same factor inputs
• Define comparative advantage

  When country A can produce the same units of output than country B but with a lower opportunity cost
• List a few advantages of specialisation

  • greater world output
  • higher standard of living for developing economies
  • increased supply of goods to choose from
• List few advantages of free trade

  • greater economic growth
  • greater efficiency due to competitive markets
  • exploit economies of scale, which brings lower costs and therefore lower prices
• What is FDI

  flow of capital from one country to another
• Why is FDI good for a developing economy

  it creates job and encourages investment in technology
• What is trade creation

  when a country consumes more imports from a low cost producer
• What happens to countries that aren't a member of a specific trading bloc

  they will face tariffs and other protectionist measures when trying to trade with members of a trading bloc
• How do tariffs affect imports

  they reduce imports, because the price of imports become more expensive
• What is a quota

  limit on the quantity of imports allowed into a country
• How do quotas affect consumer surplus

  they reduce consumer surplus because the price of these imports increase given a restriction of their output
• Draw a graph to show how subsidies affect domestic producers

  .

  
• Why does protectionism usually lead to higher prices

  protectionist measures distort the market and reduce competition, so domestic firms have no incentive to cut costs and reduce prices.
• Why are tariffs regressive

  they impact low income families the most
• what does the G20 comprise of

  20 largest economies in the world
• what is the role of the WTO

  to promote free trade
• what is the role of the world bank and IMF

  to ensure financial and economic stability
• what is the difference between the world bank and the IMF

  wolrd bank can loan funds to member countries in order to reduce poverty and promote economic stability, whereas the IMF promote monetary cooperation between member nations
• what is a bilateral trade agreement

  an agreement between two countries to favour each others goods and services
• what is the Eurozone an example of

  a monetary union
• what does being a member of a monetary union ential

  all members share the same currency and follow the same monetary policies
• List few advantages of a monetary union

  • currency is less prone to speculative shocks, reducing uncertianity
  • less red tape when travelling between member countries, thus increasing efficiency
• What is the major disadvantage of being part of a monetary union

  members have to follow the same policies so in times of economic distress they cant alter them at the expense of other member countries
• what factors contributed to chinas growth in the 1990's

  mass privitisation led to increased productivity and FDI