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|What is GDP?
|GDP is the value of all newly produced final goods and services produced in an economy within a given time period
|What does GDP measure?
|Gross Domestic Product (GDP) measures if and how much the economy is growing.
|What are the benefits of higher economic growth?
|Greater economic growth brings with it higher incomes/ It should also mean more funds are available to the Government through taxation
|What is the formula for GDP per capita?
|What is a key indicator of growth?
|What is the Human Development Index?
|A measure of economic development and economic welfare.
|What are the three elements in the Human Development Index?
|life expectancy, education and income levels
|What does a HDI score of 1 indicate?
|1 indicates a high level of economic development,
|This measures how long a person is likely to live till at birth
|Life Expectancy Index
|What are the negative implications of growth?
|Financial – especially the effects upon cash flow and gearing Managerial – problems of co-ordination and control Operational – difficulty of boosting supply in line with demand
|The selling of goods and services to other countries e.g. if the UK sells a car abroad the money flows in to the UK. In 2022, China’s biggest export was smartphone manufacturing valued at approximately $21.4 billion
|The buying of goods and services from other countries e.g. If a UK business buys raw materials from abroad the money flows out of the UK. In 2022, the UK’s biggest import was cars valued at approximately £3.25 billion
|What is the Balance of Payments?
|Exports minus imports
|What factors affect imports and exports?
|Exchange rates/Price Elasticity/ State of the economy/Non-price factors e.g. wage rises
|How does a countries inflation rate affect its imports and exports?
|If the country has a relatively high rate of inflation, domestic households and firms are likely to buy a significant number of imports
|How does a countries domestic GDP affect its imports and exports?
|If incomes rise at home, more imports may be bought. Firms are likely to buy more raw materials and capital goods, and some of these will come from abroad.
|What is specialisation?
|This occurs when economic units such as individuals, businesses, regions or countries concentrate on producing specific goods or services. Apple focus on the production of technological products and services
|What is the division of labour?
|Specialised use of workers within an organisation
|What are the benefits of specialisation?
|Likely to lead to increased output per worker (productivity) as the workforce have a better understanding of their job role
|How can specialisation occur in a country?
|Bangladesh is a major producer and exporter of textiles. Ghana specialises in cocoa and gold
|How can specialisation occur in a region?
|For many years the West Midlands has been a centre for motor car assembly, there has been huge investment in recent years in the Mini plant at Oxford
|What is Foreign Direct Investment?
|investment made by a business or other entity from one country into the production capacity of a business or other entity from another country e.g. factories.
|What is Globalisation?
|The process of greater integration and inter-connectedness between countries
|What are three features of Globalisation?
|Free movement of goods and services Free movement of labour Free movement of capital
|What is Trade Liberalisation?
|Involves removing barriers to trade between different countries and encouraging free trade
|What does Trade Liberalisation involve?
|Reducing tariffs, reducing/eliminating quotas and reducing non-tariff barriers e.g. factors that make trade difficult and expensive.
|What are Trade Barriers?
|Government policies which place restrictions on international trade. Trade barriers can either make trade more difficult and expensive (tariff barriers) or prevent trade completely (e.g. trade embargo)
|What are Trading Blocs?
|The governments of a group of countries agree to trade together freely i.e. normally with no trade barriers.
|What are Preferential Trade Areas?
|Members agree to either reduce or eliminate trade barriers for a select number of goods or services, resulting in partial trade liberalisation
|What does an Economic Union consist of?
|It comprises of the features of both a customs union and a common market, including common economic policies.
|What is a Common Market?
|Members agree to the removal of trade barriers as well as the freedom of movement of factors of production within the bloc.
|What is a Free Trade Area?
|Members agree to either reduce or eliminate trade barriers for all goods and services, resulting in trade liberalisation
|What are the features of a Free Trade Area?
|A group of countries that have removed most or all tariffs and/or quotas
|What is meant by a Tariff?
|A tax or duty that raises the price of imported products
|What are Tariffs used for?
|To protect declining industries and to protect “Infant Industries”
|What are Quotas?
|Quantitative (volume) limits on the level of imports allowed or a limit to the value of imports permitted into a country in a given time period. China has set an import quota on Cambodian rice of approximately 5.32 million tonnes per year
|Why are Quotas not popular?
|Quotas are not popular with consumers because they limit consumer choice. This makes products more expensive. The main beneficiaries of quotas are the workers, managers and shareholders who will face less competition from foreign companies.
|What are Government Subsidies?
|Involve government help (state aid) for domestic businesses facing financial problems e.g. subsidies for car manufacturers
|What is an embargo?
|A total ban on imported products.
|What is Financial Protectionism?
|When a national government instructs banks to give priority when making loans at favourable interest rates to domestic businesses
|What is per capita?
|This means looking at the data per head of population, to make it easier to compare statistics from countries of different sizes.
|What are invisible exports?
|The sale of a service to an overseas customer e.g. India running English Speaking Call Centres
|Fixed Capital Formation
|Investment in long term assets e.g. roads and buildings. In China the Government has started to invest heavily in fixed capital formation.
|What is meant by a Balance of payments deficit?
|Imports outweighs exports; if it continues indefinitely, it means ever greater build up foreign currency debt
|Define Purchasing Power Parity
|Adjusting income levels to allow for differences in the cost of living e.g. a dollar might buy three times more groceries in India than in America.
|Explain Inward (Horizontal) Foreign Direct Investment
|investment into a country such as the UK from companies abroad, perhaps in the form of buying up one of our businesses, or buying up property assets
|Describe Outward (Vertical) Foreign Direct Investment
|Investment from a country such as the UK, perhaps buying a factory in Brazil or buying property in Nairobi. Dyson has moved its manufacturing from the UK to Malaysia, China and the Philippines.
|Rules created as a result of laws passed by Parliament
|Define Structural Unemployment
|Potentially long term unemployment as a fundamental economic shift makes an industry and therefore the skills of its workers obsolete e.g. the closure of coal mines in the 1980s.
|Define Emerging Economies
|An economy with incomes that are growing but are still quite low. Such countries constitute approximately 80% of the global population and represent about 20% of the world's population.
|Who are the BRIC Economies?
|The economies of Brazil, Russia, India and China, which are at a similar stage of economic development.
|State two ways that countries try to attract FDI
|Countries try to attract FDI using strategies such as lower levels of corporation tax, subsidies for the building of factories, and investment in infrastructure such as roads, ports and airports.
|Give three reasons why International Trade is increasing
|(1)Reduction of international trade barriers/trade liberalisation (2)Reduced cost of transport and communication (3)Increased significance of transnational corporations (4)Increased investment flows (5)Migration within and between economies
|State two benefits of Trade Liberalisation
|(1)Increased economies of scale (2)Greater competition, which can drive down costs and improve quality.
|State two drawbacks of Trade Liberalisation
|(1) Potential loss of local businesses due to increased competition (2)Infant industries could be lost to foreign competitors (3)Vulnerability of some industries to dumping by overseas rivals
|Dumping occurs when a country has excess stock and so it sells below cost on global markets, causing other producers to become unprofitable.
|Define Structural Change
|This occurs when a country, industry or market changes which sector of industry they operate in E.g. the UK has shifted from the manufacturing sector to the tertiary sector over the last 50 years
|Explain how Pollical Change can contribute to increased Globalisation
|Changes in the government of a country can influence the country's attitude to trade E.g. China joined the World Trade Organisation in 2001 which led to a significant increase in exports
|Explain how Migration can contribute to increased Globalisation
|Migration has led to increased globalisation as better transportation and deregulation have allowed workers to have more flexibility when looking for work E.g. In 2022, the United Arab Emirates had the highest proportion of immigrants at 88%
|Explain how reduced costs of transport can contribute to increased Globalisation
|Economies of scale due to innovation in containerisation on large ships has reduced business costs
|Explain how Transnational Corportaions have contributed to Globalisation
|They will have their headquarters in one country but have other branches in other countries E.g. Nike has its headquarters in Oregon, United States. As of 2022, they have 1046 retail stores throughout the world
|State three ways that countries benefit from FDI
|(1) Increased economic growth as there is an inflow of money into the country (2) Increased job opportunities as businesses expand operations (3) Access to knowledge and expertise from foreign investors
|Explain why emerging economies are growing at a faster rate than the UK
|Emerging economies are growing at a faster rate than the UK economy because of the growth of the manufacturing sector. UK economy has seen a decline in the manufacturing sector. China is the world’s largest manufacturing economy and exporter of goods
|State two benefits of Economic Growth on Individuals
|(1) Reduced unemployment as there is more demand which requires more labour (2) Increased average incomes as individuals now have rising incomes due to employment (3)Access to quality public services as more tax revenue is generated
|State two benefits of Tariffs
|(1)They protect infant industries so they can eventually become more competitive globally (2) An increase in government tax revenue (3) Reduces dumping by foreign businesses as they cannot sell below the market price
|State two drawbacks of Tariffs
|(1) Increases the cost of imported raw materials which may affect businesses who use these goods for production (2)Reduces competition for domestic firms who may become more inefficient (3) Reduces consumer choice as imports are now more expensive
|Explain two benefits of Import Quotas
|(1)To meet extra the demand, domestic businesses may need to hire more workers which reduces unemployment and benefits the wider economy (2)The higher prices for the product may encourage new businesses to start up in the industry
|State two problems of Import Quotas
|(1)Quotas limit the supply of a product & whenever supply is limited, the price of the product rises (2)May generate tension in the relationship with trading partners (3) Domestic firms may become inefficient as quotas reduce the level of competition
|Explain how Government Legislation acts as a form of protectionism
|Governments can impose laws to restrict certain imports to protect customers and businesses/Imports may need to meet strict regulations in order to be allowed into the country
|State one benefit and one drawback of Legislation as a form of protectionism
|Benefit - Allows domestic firms to grow as they have limited competition from businesses abroad Drawback - Can lead to retaliation from countries facing the legislation
|Explain using an example what is meant by Domestic Subsidies
|Payments are given to domestic businesses to help lower costs of production e.g. Post Brexit, the UK Government is providing subsidies to its farmers in order to decrease their costs of production
|Describe two benefits of Domestic Subsidies
|(1) Reduced costs can lead to lower prices making domestic firms more competitive in international markets as their exports may be cheaper (2)Businesses remain competitive and this helps to protect jobs in the industry
|What are two benefits for businesses of belonging to a trading bloc ?
|(1)Access to more markets - able to sell to more customers due to free movement of goods (2) Free movement of labour - allowing businesses to source workers from a wider pool (3) External tariff walls - Tax placed on countries outside the bloc
|What are two drawbacks for businesses of belonging to a trading bloc?
|(1) Retaliation - External tariff walls set against countries outside of the trading bloc may lead to retaliation from these countries (2) In order to operate as one market, new rules and regulations may be put in place E.g. The EU working time directive