A2 Macroeconomics notes
4.1- International economics
4.1.1- Globalisation
a) Characteristics of globalisation
Globalisation is the increasing integration of economies around the world. There are some key
characteristics of globalisation:
-The free movement of capital and labour across international boundaries.
-Free trade in goods and services between different countries.
-The availability of technology and intellectual capital on an international scale.
-International trade becoming a greater proportion of overall trade.
-Increased financial capital flows between countries.
-Increased integration of production.
-Deindustrialisation of developed countries and the industrialisation of developing/emerging
countries.
-Increased foreign ownership of firms.
b) Factors contributing to globalisation
Trade liberalisation- The removal of tariffs and other restrictions on international trade.
Global product standards- Consumers have more confidence in products bought from abroad.
Costs- The real costs of transportation has been reduced making it cheaper to transport goods all over
the world.
Improvements in communications and technology- The Internet has made communication easier and
cheaper.
Foreign direct investment- MNCs wishing to increase profits has led to investments abroad.
Economies of scale- Firms often expand abroad to take advantage of economies of scale.
Specialisation- More international specialisation meaning countries have to import the goods they do
not specialise in making.
c) Impact on countries, governments, producers, consumers, workers and the environment
Countries- They may benefit if globalisation leads to rising incomes, more jobs of better quality, lower
prices and more consumer choices. However, it can also lead to the loss of some industries, higher
unemployment and lower wages.
Governments- They are likely to have increased pressure due to potential corruption and bribery.
Furthermore, governments will find it harder to tax MNCs, as they are able to avoid tax by paying in a
different jurisdiction.
Producers- Producers are able to source products from all over the world so it is likely that costs will
be reduced. However, faults in other countries can have large effects on the UK because globalisation
is the increase interconnectedness of the world’s economy. Firms wishing to maximise profit have the
ability to destroy jobs and prosperity when moving production between countries.
Consumers- The range of products available to consumers has increased hugely whilst prices have
generally fallen as well. However, some prices have risen because globalisation increases incomes and
this had led to increased demand for certain products. Incomes have generally been raised throughout
the world however many have lost jobs due to the production being moved abroad so those on below
average incomes are more likely to have lost.
4.1- International economics
4.1.1- Globalisation
a) Characteristics of globalisation
Globalisation is the increasing integration of economies around the world. There are some key
characteristics of globalisation:
-The free movement of capital and labour across international boundaries.
-Free trade in goods and services between different countries.
-The availability of technology and intellectual capital on an international scale.
-International trade becoming a greater proportion of overall trade.
-Increased financial capital flows between countries.
-Increased integration of production.
-Deindustrialisation of developed countries and the industrialisation of developing/emerging
countries.
-Increased foreign ownership of firms.
b) Factors contributing to globalisation
Trade liberalisation- The removal of tariffs and other restrictions on international trade.
Global product standards- Consumers have more confidence in products bought from abroad.
Costs- The real costs of transportation has been reduced making it cheaper to transport goods all over
the world.
Improvements in communications and technology- The Internet has made communication easier and
cheaper.
Foreign direct investment- MNCs wishing to increase profits has led to investments abroad.
Economies of scale- Firms often expand abroad to take advantage of economies of scale.
Specialisation- More international specialisation meaning countries have to import the goods they do
not specialise in making.
c) Impact on countries, governments, producers, consumers, workers and the environment
Countries- They may benefit if globalisation leads to rising incomes, more jobs of better quality, lower
prices and more consumer choices. However, it can also lead to the loss of some industries, higher
unemployment and lower wages.
Governments- They are likely to have increased pressure due to potential corruption and bribery.
Furthermore, governments will find it harder to tax MNCs, as they are able to avoid tax by paying in a
different jurisdiction.
Producers- Producers are able to source products from all over the world so it is likely that costs will
be reduced. However, faults in other countries can have large effects on the UK because globalisation
is the increase interconnectedness of the world’s economy. Firms wishing to maximise profit have the
ability to destroy jobs and prosperity when moving production between countries.
Consumers- The range of products available to consumers has increased hugely whilst prices have
generally fallen as well. However, some prices have risen because globalisation increases incomes and
this had led to increased demand for certain products. Incomes have generally been raised throughout
the world however many have lost jobs due to the production being moved abroad so those on below
average incomes are more likely to have lost.
