Globalisation | Edexcel A-Level Economics B (9EB0)
Globalisation
- 195 questions
- 14 subtopics
- Theme 3: the global economy
- Paper 2 and Paper 3
Globalisation is examined in Paper 2, Competing in the global economy, and in Paper 3, The economic environment and business.
It covers the growing economic power of China and India, Africa and other emerging markets, rising incomes, firms and shifting employment patterns, nominal and real values, index numbers, trade liberalisation and economic growth, specialisation and comparative advantage, foreign direct investment and growth, trade creation and trade diversion, trading blocs and the single market, trading blocs, firms and growing interdependence, protectionism: tariffs, quotas and other trade barriers, trade negotiations and international institutions and exchange rate changes and the Eurozone.
Sample questions from Globalisation
Answer each one closed book first, then open the answer.
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The growing economic power of China and India
How do rising Chinese wages affect a Western firm that has manufactured there for twenty years?
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Its unit costs rise, so it must accept a thinner margin, raise prices, automate, or move production to a lower-wage economy such as Vietnam or Bangladesh. -
Africa and other emerging markets
Give two reasons a manufacturer might choose Vietnam over China for a new factory.
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Vietnamese wages are lower than Chinese wages, and producing outside China spreads the firm's political and tariff risk across more than one country. -
Nominal and real values
Nominal sales are £52 million and the price index has risen from 100 to 130 since the base year. Calculate real sales in base-year prices.
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Real sales are £52 million × 100 ÷ 130 = £40 million. -
Index numbers
Why can two countries' index numbers not be compared directly unless they share a base year?
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Each index measures change only from its own base, so identical index values can represent very different absolute levels and different starting points. -
Specialisation and comparative advantage
Why must the terms of trade lie between the two countries' opportunity cost ratios for both to gain?
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If the rate at which the goods exchanged fell outside that range, one country could obtain the good more cheaply by producing it itself, so it would refuse to trade. -
Foreign direct investment and growth
How can inward foreign direct investment crowd out domestic firms?
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A large well-financed multinational can outbid local firms for skilled workers and sites and undercut them on price, so domestic competitors lose market share or close. -
Trading blocs and the single market
What is an economic and monetary union?
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An economic and monetary union is a single market whose members also share a single currency and a common monetary policy set by one central bank. -
Trading blocs, firms and growing interdependence
Why does interdependence make a country's economic policy less effective?
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Much of any demand stimulus leaks abroad as imports, and interest rate or tax changes can be offset by capital flows and by conditions in the countries it trades with.
The 14 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| The growing economic power of China and India | China and India shifting world output towards Asia, China as the workshop of the world, World Trade Organisation membership, China's slowing growth and rising wages, India's services-led growth model and offshored back-office work, the demographic dividend, weak infrastructure, the middle-income trap, middle-class demand, commodity prices, and concentration risk. | 13 |
| Africa and other emerging markets | Emerging markets, BRICS and MINT, Africa's population growth and natural resources, commodity dependence, mobile money, the African Continental Free Trade Area and low intra-African trade, contract enforcement, Vietnam against China, informal sectors, volatile emerging-market currencies, and capital flight. | 14 |
| Rising incomes, firms and shifting employment patterns | How spending patterns change as incomes rise and Engel's law, income elasticity of demand and inferior goods, rationalisation through overseas growth, trade opportunities in emerging economies, deindustrialisation, falling UK manufacturing employment, changing skill demands, structural unemployment, rising multinational costs, building capacity ahead of demand, and middle-class products. | 15 |
| Nominal and real values | Nominal against real values and the formula for converting between them, real GDP, calculating real pay and real sales, the approximation for real growth and when it breaks down, deflating a data series, overseas revenue in real terms, real interest rates, purchasing power parity comparisons, and fixed money pensions. | 13 |
| Index numbers | Index numbers and the base year of 100, the formula for an index and calculating one, percentage changes against point changes in an index, weighted indices and revising weights, working back to actual values, comparing indices with different base years, values below 100, presenting data as an index, and reading an index over time. | 14 |
| Trade liberalisation and economic growth | Trade liberalisation and the developments that eased trade since the 1950s, GATT and the World Trade Organisation, falling transport costs and location, how liberalisation raises growth and long-run aggregate supply and benefits consumers, resistance and the infant industry argument, concentrated costs, the race to the bottom, inequality, and slow gains. | 13 |
| Specialisation and comparative advantage | Specialisation in international trade, absolute and comparative advantage and David Ricardo, calculating comparative advantage and opportunity cost ratios, the terms of trade needed for mutual gain, the assumptions of the theory, transport costs, over-specialisation, lower unit costs, global value chains, services specialisation, and changing comparative advantage. | 14 |
| Foreign direct investment and growth | Foreign direct investment, greenfield against brownfield, why multinationals invest abroad, short-run and long-run effects on host country growth, technology transfer, profit repatriation, transfer pricing, footloose capital, crowding out domestic firms, political stability, the balance of payments, and outward investment. | 13 |
| Trade creation and trade diversion | Trade creation and trade diversion and Jacob Viner, consumer welfare gains, why diversion reduces world efficiency, classifying a switch in steel imports, the common external tariff, lost tariff revenue, blocs with similar industries, protected domestic firms, benefits of diversion to firms inside a bloc, and net welfare effects. | 12 |
| Trading blocs and the single market | Trading blocs, free trade areas against customs unions, the single market and its four freedoms, economic and monetary union, rules of origin, ASEAN and its aims, NAFTA and its replacement, vehicle manufacturing in North America, harmonised product standards, the costs of a customs union, and free movement of labour. | 13 |
| Trading blocs, firms and growing interdependence | How bloc membership enlarges a firm's market and lowers average costs, tariff-jumping foreign direct investment, disadvantages to domestic firms, economic interdependence and just-in-time supply chains, financial contagion, weaker national policy, oil price shocks, reducing exposure, and reshoring. | 12 |
| Protectionism: tariffs, quotas and other trade barriers | Protectionism, tariffs and the tariff diagram with its welfare areas, calculating tariff revenue, deadweight loss, import quotas and quota rent, tariffs against quotas for government finances, non-tariff barriers, regulations as hidden barriers, embargoes, domestic production subsidies and their diagram, arguments for protection, and retaliation. | 18 |
| Trade negotiations and international institutions | The World Trade Organisation, the most favoured nation principle and national treatment, dispute settlement and slow trade rounds, the International Monetary Fund and conditionality, the World Bank, the G20 and policy coordination, bilateral trade agreements and their advantages, the spaghetti bowl criticism, and developing countries' view of trade rules. | 14 |
| Exchange rate changes and the Eurozone | Exchange rates, depreciation against devaluation, calculating export prices, SPICED, why depreciation may not improve the current account at once, the Marshall-Lerner condition, imported components, cost-push and demand-pull inflation, appreciation and employment, foreign direct investment, the Maastricht convergence criteria, the benefits and costs of the Eurozone, and asymmetric shocks. | 17 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
Edexcel A-Level Economics B Active Recall Guide
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