What is globalisation?
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What is globalisation?
Globalisation is the economic integration of different countries through increasing freedoms in the cross-border movement of people, goods and services, technology, and finance.
Define the term multinational corporation (MNC).
A multinational corporation (MNC) is a business that has production facilities in two or more countries.
True or False?
MNCs do not benefit from economies of scale.
False.
MNCs do benefit from economies of scale, as they operate globally and can increase their output, benefiting from lowered costs.
Define the term worker exploitation.
Worker exploitation refers to MNCs providing poor working conditions and paying very low (sweatshop) wages.
What is resource plundering?
Resource plundering occurs when MNCs extract large quantities of host nation natural resources, often providing very little compensation or payment.
Why do MNCs have political power?
MNCs often have higher revenue than the value of the GDP of the host nation, giving them immense political power that can be used to their advantage.
True or False?
MNCs benefit local firms in the countries that they operate in.
False.
MNCs are so large that they can outcompete domestic firms in the host country, putting many firms out of business and reducing competition.
What is a disadvantage of MNCs related to cultural awareness?
A disadvantage of MNCs is their lack of local knowledge and culture, which may result in problematic local relationships, flawed advertising campaigns, or inappropriate product offerings.
What is the major risk associated with the activity of MNCs in developing countries?
MNCs are associated with many negative externalities of production in developing countries.
What is international trade?
International trade refers to the exchange of goods and services between countries in the form of imports and exports.
Define the term free trade.
Free trade is when there is no government intervention (quotas, taxes, etc.) to reduce or limit trade.
True or False?
Free trade leads to greater choice for consumers.
True.
There is access to a wider variety of goods and services.
How does free trade impact prices?
Free trade leads to lower prices, as international competition drives prices down, giving households the ability to buy more.
What is a benefit of free trade related to international cooperation?
Free trade requires international cooperation, which helps countries build better relationships and leads to lower levels of hostilities.
How does free trade impact production costs?
Free trade provides increased access to raw materials, allowing output to increase and costs of production to fall.
State the meaning of increased global efficiency.
Increased global efficiency is where trade and specialisation allow the most efficient firms to emerge, improving the use of global resources.
What is the impact of free trade on economic growth?
Free trade can lead to economic growth, as exports are a key component of a country's gross domestic product, and an increase in exports can drive growth.
How does free trade contribute to economic development?
Free trade leads to increased output, lower unemployment, higher incomes, and a higher standard of living, contributing to economic development.
True or False?
Trading partners may retaliate against any methods of protectionism.
True.
Trading partners may retaliate against any methods of protectionism, so they should be carefully considered before implementation.
What is the purpose of protecting infant industries?
Infant industries are protected to help new firms succeed at start-up, as they would be unlikely to compete with the level of global competition. Once established, support is removed.
Define the term sunset industries.
Sunset industries are industries on their way out, and the government chooses to support them to help limit the economic damage that would occur if they closed abruptly.
Why are strategic industries protected?
Strategic industries such as energy, defence, and agriculture are essential to self-sufficiency and security. Being reliant on other countries for these creates vulnerabilities for a nation.
What is dumping?
Dumping occurs when one country sells excess products to another country at a price below the cost of production.
How does protectionism aim to protect employment?
When certain industries relocate abroad, the government may introduce a tariff on imports for that industry. This makes imports more expensive, and domestic firms can compete more effectively, which protects employment.
Define the term current account deficit.
A current account deficit occurs when the value of imports exceed exports, with more money leaving the country to support foreign firms than entering to support domestic firms.
What is a tariff?
A tariff is a tax on imported goods or services (customs duty).
True or False?
Tariffs make domestic firms less competitive.
False.
Tariffs make domestic firms more competitive.
Define the term quota.
A quota is a physical limit on imports, usually set below the free market level of imports.
How do subsidies protect domestic producers?
A subsidy lowers the cost of production for domestic firms, allowing them to increase output, lower prices, and become more competitive internationally.