Globalisation and the International Economy Questions with 100% Correct Solutions Latest
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Module
International Economy
Institution
International Economy
globalisation - ANSWER the integration or interconnectedness of national economies through
trade of goods and services, capital flows (consisting of foreign direct investments and hot
money), and labour migration
impacts of globalisation - ANSWER 1. increased and freer trade in goods and service...
Globalisation and the International Economy Questions with 100% Correct Solut ions Lates t globalisation - ANSWER the integration or interconnectedn ess of national economies through trade of goods and services, capital flows (consisting of foreign direct investments and hot money), and labour migration impacts of globalisation - ANSWER 1. increased and freer trade in goods and services 2. increased f low of capital 3. increased flow of labours increased and freer trade in goods and services - ANSWER -*free flow* of goods and services, with *minimal government intervention -*brings about more competition for domestic firms* due to access to goods and services in foreign countries, making it easier to find substitutes increased flow of capital - ANSWER -caused by the emergence of worldwide financial markets and liberation of capital markets -> movement of capital and integration of financial markets *Long -term capital flow: Foreign Direct Investment (FDI)* -when firms choose to cross international borders to invest in other countries (building a factory on foreign shores) - Seen in the rise and expansions of multinational corporations (MNCs) and transn ational corporations (TNCS) -causes increased competition and increased technology transfer *Short -term capital flow: Hot money* -short term capital flows or hot money (e.g. currencies, share certifications) also happen when financial products and service s are bought and sold across countries increased flow of labour - ANSWER free flow of people: international movement of labour or migration factors affecting globalisation (reasons for) - ANSWER 1. increased specialisation and exchange according to the " Theory of Comparative Advantage" -> led to increased free trade 2. improvements in infrastructure and technology (transport and telecommunications, etc.) -> led to increased trade, capital and labour flows 3. improvement in transportation technology -> led to increase in trade, FDI and labour flows 4. improvement in communication technology -> led to increased trade, FDI and labour flows 5. government policies -> led to increased free trade, capital flows and labour flows 6. changes in taste and preferences due to the desire for a greater variety of goods for consum er -> led to increased trade increased specialisation and exchange according to the "Theory of Comparative Advantage" -> led to increased free trade - ANSWER Theory of Comparative Advantage -> trade between nations is beneficial to all if each specialises and trades according to their CA *Differences in Natural Ability to Produce/Factor Endowment* mineral deposits are only naturally found in certain parts of the world *Differences in the Factor Costs of Producing the Same Good* goods can be produced dom estically but cheaper to import -> causes *difference in the opportunity costs* -> *specialisation of goods produced in a country based on its lower opportunity costs* -> make it possible for a country to *consume* outside of its production possibility cur ve (enjoy higher SOL) improvements in infrastructure and technology (transport and telecommunications, etc.) -> led to increased trade, capital and labour flows - ANSWER geographical distances and poor communication as potential hindrances or limits free trade improvement in transportation technology -> led to increase in trade, FDI and labour flows - ANSWER *Increase in Trade* -makes buying imported goods less expensive -allows countries to trade based on CA *Increase FDI Flows* -set up production elsew here -cheap to ship goods back home and anywhere *Increase in Labour Flows* -cheaper air tickets to fly back home improvement in communication technology -> led to increased trade, FDI and labour flows - ANSWER *Increase in Trade* -E-commerce (e.g. Apple, Amazon, Alibaba) -Knowledge products (e.g. software & media content) *Increase in FDI Flows* -Able to base produc tion elsewhere -Off-shoring and/or on -shoring production *Increase in Labour Flows*
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