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Theme 4 Revision - Coggle Diagram
Theme 4 Revision
Growing economies
Economic growth is an increase in the production of goods and services in an economy.
GDP is a measure of the size of an economy
HDI is the human development index which is a single measure that combines health, income and education.
Implications of economic growth: trade opportunities- likely for wages to rise, strong infrastructure- may consider off shoring.
Opportunities for emerging economies: rapid growth, increase in average incomes, increased spending, increased demand for domestic goods.
Threats of economic growth; debt, poverty, political and institutional factors, access to credit and banking, demographic factors, income distribution, war, disease, gender issues.
Emerging economies experience faster growth due to: FDI, access to low cost labour, natural resources, often good infrastructure.
Factors contributing to increased globalisation
Globalisation is the integration of the world's economies.
Trade liberalisation- the removal or reduction of barriers to trade.
Benefits: Companies that import materials will have lower costs, increased opportunity to export goods, economies of scale.
Drawbacks: domestic firms will see increased competition on price, domestic firms may have a reduction in sales, infant firms may not be able to compete with international firms.
Political change- changes in a country's government can influence the countries attitude to trade.
Reduced cost of transport and communication: allows for economies of scale due to containerisation, technological advancements have made it easier for buyers and sellers to connect.
Increased significance of global companies
Increased FDI flows
Migration: creates growth of labour force
International trade
Britain import goods and services worth over £40bn a month. They export over £30bn per month.
Specialisation occurs when a country/business decides to focus on making a particular good/service.
Benefits of specialisation: greater output, greater variety within the goods, economic growth, lower unit costs.
Drawbacks of specialisation: structural unemployment, over reliance, changing tastes and fashions, finite resources.
FDI is the inflow of money from abroad in the form of buying fixed assets or setting up operations, which enable the firm to grow organically or externally.
Benefits of FDI: economic development stimulation, easy international trade, employment and economic boost, tax incentives, reduced costs, increased productivity, increase in a country's income.
Protectionism
Protectionism is an approach used by governments to protect domestic producers- tariffs, quotas, subsidies and legislation.
Advantages of tariffs: domestic produced goods do not incur tariff so are likely to be cheaper, more job security, protect infant businesses from being swamped by international companies, raise tax revenue for gov.
Disadvantages of tariffs: high import price won't put many off buying, unfair competition, retaliation of other countries.
Dumping is when an overseas firm sells their product in a foreign market for below market price- known as predatory pricing.
Advantages of quotas: boost local investment, protects domestic businesses, creates more jobs.
Disadvantages of quotas: often lasts longer than needed as infant industry matures, trading partners match quotas, complex requiring a lot of paperwork.
Trade Blocs
A trade bloc os a type of intergovernmental agreement agreeing to reduce trade barriers.
The EU contains 27 countries, it is a common market as there is no protectionism.
Other examples: NAFTA, ASEAN
Opportunities of trading blocs: freedom to trade, enlarged market, protection from international competition, freedom of movement of people.
Drawbacks of trade bloc: can't use protectionism in own country, may want to trade with members outside your bloc.
Conditions that prompt trade
Push Factors
Saturated domestic market: firm is strugglinh to find new customers
Competition: giant new competitor enters market.
Pull Factors
Economies of scale
Off shoring: lowers costs
Outsourcing