Becc Mod 4: The Global Economy - Exam Study Guide
Disclaimer: This guide is a comprehensive study aid based on a typical "Global
Economy" module. Always prioritize your official course materials, lectures, and syllabus
for specific content.
Section 1: Introduction to Globalization
1. What is the core definition of economic globalization?
ANSWER ✓ The process of increasing interdependence and integration of national
economies across the world through cross-border movement of goods, services,
technology, capital, and information.
2. What are the three main types of globalization?
ANSWER ✓ Economic globalization (trade, finance), Political globalization (international
organizations like the UN, WTO), and Cultural globalization (spread of ideas, media, and
culture).
3. What is a key driver of globalization since the late 20th century?
ANSWER ✓ Rapid advancements in information and communication technology (ICT),
which have drastically reduced the cost and increased the speed of moving information
and coordinating global business.
4. How do containerization and improved logistics support globalization?
ANSWER ✓ They drastically reduce the cost and time of transporting goods, making
international trade in physical products more efficient and profitable.
5. What role do Transnational Corporations (TNCs) play in globalization?
ANSWER ✓ TNCs are primary agents of globalization; they operate in multiple countries,
creating complex global supply chains and driving cross-border flows of investment,
technology, and goods.
, 6. What is the difference between outsourcing and offshoring?
ANSWER ✓ Outsourcing is contracting a third party to perform services. Offshoring is
moving business processes to another country. A company can outsource offshore
(contract a foreign firm) or offshore in-house (set up its own facility abroad).
7. What is a global supply chain?
ANSWER ✓ A network of individuals, organizations, resources, activities, and technology
involved in the production and sale of a product, spanning multiple countries from raw
materials to the final consumer.
8. What is the "digital divide" in the context of globalization?
ANSWER ✓ The gap between individuals and regions that have access to modern
information and communications technology and those that do not, which can
exacerbate global inequalities.
9. What is one major criticism of globalization from an economic perspective?
ANSWER ✓ It can lead to a "race to the bottom" in labor and environmental standards
as countries compete for investment, and it can increase income inequality within and
between nations.
10. What is the "Washington Consensus"?
ANSWER ✓ A set of free-market economic policies (e.g., trade liberalization,
privatization, deregulation) often promoted for developing countries by international
institutions like the IMF and World Bank in the late 20th century.
Section 2: International Trade Theory and Policy
11. What is the principle of absolute advantage?
ANSWER ✓ A country has an absolute advantage when it can produce a good using
fewer resources (e.g., labor hours) than another country.
12. What is the principle of comparative advantage?
, ANSWER ✓ A country has a comparative advantage in producing a good if it can
produce it at a lower opportunity cost than another country. It is the foundational
rationale for why trade is beneficial, even if one country is better at producing
everything.
13. What is the Heckscher-Ohlin (H-O) model of trade?
ANSWER ✓ A theory stating that countries will export goods that intensively use their
abundant factors of production (e.g., labor, capital, land) and import goods that
intensively use their scarce factors.
14. What is the Leontief Paradox?
ANSWER ✓ The finding by economist Wassily Leontief that the U.S., a capital-abundant
country, was exporting more labor-intensive goods and importing more capital-
intensive goods, which contradicted the predictions of the Heckscher-Ohlin model.
15. What is a tariff?
ANSWER ✓ A tax imposed on imported goods, which increases their price in the
domestic market and is used to protect domestic industries or generate government
revenue.
16. What is a non-tariff barrier (NTB)?
ANSWER ✓ A form of trade restriction that is not a tariff, such as import quotas,
subsidies to domestic producers, complex regulatory standards, or voluntary export
restraints (VERs).
17. What is the primary purpose of an import quota?
ANSWER ✓ To limit the physical quantity of a good that can be imported into a country
over a specific period, protecting domestic producers from foreign competition.
18. What is the main economic effect of a protective tariff?
ANSWER ✓ It raises the domestic price of the imported good, which benefits domestic
producers (they can charge more and sell more) but harms domestic consumers (they
pay higher prices) and foreign producers.
19. What is the "infant industry argument" for protectionism?
Disclaimer: This guide is a comprehensive study aid based on a typical "Global
Economy" module. Always prioritize your official course materials, lectures, and syllabus
for specific content.
Section 1: Introduction to Globalization
1. What is the core definition of economic globalization?
ANSWER ✓ The process of increasing interdependence and integration of national
economies across the world through cross-border movement of goods, services,
technology, capital, and information.
2. What are the three main types of globalization?
ANSWER ✓ Economic globalization (trade, finance), Political globalization (international
organizations like the UN, WTO), and Cultural globalization (spread of ideas, media, and
culture).
3. What is a key driver of globalization since the late 20th century?
ANSWER ✓ Rapid advancements in information and communication technology (ICT),
which have drastically reduced the cost and increased the speed of moving information
and coordinating global business.
4. How do containerization and improved logistics support globalization?
ANSWER ✓ They drastically reduce the cost and time of transporting goods, making
international trade in physical products more efficient and profitable.
5. What role do Transnational Corporations (TNCs) play in globalization?
ANSWER ✓ TNCs are primary agents of globalization; they operate in multiple countries,
creating complex global supply chains and driving cross-border flows of investment,
technology, and goods.
, 6. What is the difference between outsourcing and offshoring?
ANSWER ✓ Outsourcing is contracting a third party to perform services. Offshoring is
moving business processes to another country. A company can outsource offshore
(contract a foreign firm) or offshore in-house (set up its own facility abroad).
7. What is a global supply chain?
ANSWER ✓ A network of individuals, organizations, resources, activities, and technology
involved in the production and sale of a product, spanning multiple countries from raw
materials to the final consumer.
8. What is the "digital divide" in the context of globalization?
ANSWER ✓ The gap between individuals and regions that have access to modern
information and communications technology and those that do not, which can
exacerbate global inequalities.
9. What is one major criticism of globalization from an economic perspective?
ANSWER ✓ It can lead to a "race to the bottom" in labor and environmental standards
as countries compete for investment, and it can increase income inequality within and
between nations.
10. What is the "Washington Consensus"?
ANSWER ✓ A set of free-market economic policies (e.g., trade liberalization,
privatization, deregulation) often promoted for developing countries by international
institutions like the IMF and World Bank in the late 20th century.
Section 2: International Trade Theory and Policy
11. What is the principle of absolute advantage?
ANSWER ✓ A country has an absolute advantage when it can produce a good using
fewer resources (e.g., labor hours) than another country.
12. What is the principle of comparative advantage?
, ANSWER ✓ A country has a comparative advantage in producing a good if it can
produce it at a lower opportunity cost than another country. It is the foundational
rationale for why trade is beneficial, even if one country is better at producing
everything.
13. What is the Heckscher-Ohlin (H-O) model of trade?
ANSWER ✓ A theory stating that countries will export goods that intensively use their
abundant factors of production (e.g., labor, capital, land) and import goods that
intensively use their scarce factors.
14. What is the Leontief Paradox?
ANSWER ✓ The finding by economist Wassily Leontief that the U.S., a capital-abundant
country, was exporting more labor-intensive goods and importing more capital-
intensive goods, which contradicted the predictions of the Heckscher-Ohlin model.
15. What is a tariff?
ANSWER ✓ A tax imposed on imported goods, which increases their price in the
domestic market and is used to protect domestic industries or generate government
revenue.
16. What is a non-tariff barrier (NTB)?
ANSWER ✓ A form of trade restriction that is not a tariff, such as import quotas,
subsidies to domestic producers, complex regulatory standards, or voluntary export
restraints (VERs).
17. What is the primary purpose of an import quota?
ANSWER ✓ To limit the physical quantity of a good that can be imported into a country
over a specific period, protecting domestic producers from foreign competition.
18. What is the main economic effect of a protective tariff?
ANSWER ✓ It raises the domestic price of the imported good, which benefits domestic
producers (they can charge more and sell more) but harms domestic consumers (they
pay higher prices) and foreign producers.
19. What is the "infant industry argument" for protectionism?
