I&S EOY TEST | Quizlet

International Trade

The exchange of goods and services among nations. This type of trade connects countries in a global economy, where prices or supply and demand affect and are affected by global events.

Comparative Advantage

is the ability of a country to produce a certain good at a lower opportunity cost, more efficiently, or at a higher quality than other countries. This advantage allows them to participate in the global marketplace by focusing on producing goods they have comparative advantage on while trading for the rest.

Absolute advantage

Is the ability of a country to produce more of a good using the same or fewer amount of resources.

Benefits of Trade

1. Access to resources- produce goods etc. that would not have been available domestically.

2. Increased efficiency - encourages countries to specialize in producing goods they are efficient at.

3. Economic growth- provides production outlet and employment opportunities leading to higher GDP

4. Variety for consumers - wider variety of products to choose from leading to better prices and quality in goods and services.

5. Economies of Scale - specialization and larger production volumes lead to lower costs and lower prices for consumers

6. Competition - countries strive to maintain a competitive edge leading to more innovation

7. Better political and economic relations - more stable and peaceful international environment

What factors pose a challenge to trade

1) Bureaucracy - laws, regulations, guidelines, policies

2) Political factors - war, protest, protectionism, trade sanctions

3) Economic Factors - currency, demographics, inflation, inequality

4) Social factors- Language, culture, crime, pandemics

5) Geographic Factors - distance, infrastructure, climate, disasters

Define Globalization

Increasing connectedness and interdependence of world cultures and economies

How trade changed after WWII

Before WWII countries used protectionist trade policies like tariffs and sanctions to protect domestic industries. However, post was U.S was the largest and most powerful economy and U.S policy makes had the power to direct the reconstruction of Europe and world order. U.S policymakers pushed for free trade and reduced trade barriers to encourage global economy recovery. At the 1994 Brenton Woods conference U.S with its allies created institutions like IMF and World bank to promote economic stability. Later, in 1997 the GATT was established, reducing trade barriers and making trade laws. In short, after WWII trade was more organized, global and cooperative with U.S playing a major role in creating this system still followed today.

WTO

Created in 1995 to ensure fair trade between countries and resolve disputes. Criticized for favoring wealthier nations and reducing national sovereignty.

NAFTA

North American Fair trade agreement began in 1994 to reduce trade barriers between U.S, Canada and Mexico. Faced criticism over job loss as companies moved to Mexico for cheap labor.

European Union

Formed after WWII to prevent future wars between European countries and strengthen economies through cooperation. Created a single market and shared currency. Faced criticism over rules created.

Success of globalization

i) Spread of industrial technology resulted in lower percentage of world population living in poverty

ii) Sharing of medical knowledge eliminated diseases

iii) Interdependent economies discourages war

Winners of globalization

1) Multinational Corporations - Cheaper Raw Materials, Lower Labor costs, outsourcing serterm-12vices, tax advantages, global production chains and overseas markets.

2) Developed countries - Colonial baground, more bargaining power, elite transitional capitalists using low tax locations,

globally focused economic interests.

3) Emerging Markets - More jobs in countries where they are needed, boosting national economies and raising living standard. Countries with low labor costs and good export infrastructure benefit greatly and there are growing middle class with rising real incomes

4) Consumers - Access to wider variety of products, low manufacturing costs = cheaper goods = better standard of living

5) Skilled workers - rising real income, flexible job market and employment opportunities

Negative effects of globalization

i) Migration can cause social tensions and ideological conflicts

ii) Multinational Companies can drive local companies out of business and overpower government

iii)Threatens cultural diversity, making world more uniform to fit western model.

iv) Nations feel like they are losing control and sacrificing sovereignty

v) operates in the interest of the richest countries, which dominate world trade

Why do developed (rich) countries dominate global trade?

Developed countries dominate trade because they negotiate agreements that mainly benefit them, giving their companies better access and protection. They give subsidies to their own industries, making their products cheaper globally and hurting competition from developing countries. They also place tariffs and quotas on goods from poorer nations, limiting their access. Institutions like the IMF, World Bank, and WTO are led by developed countries, allowing them to shape trade rules. Their advanced infrastructure and market systems also help their companies grow faster and compete globally.

Why do local businesses struggle to compete with multinational companies?

Local companies struggle because multinationals have more money for research, marketing, and expansion. They can afford to lose money while building a customer base and use global supply chains to lower prices. Their strong branding and legal teams help them navigate complex regulations, while local businesses can't keep up. Their global reach also allows them to access more customers, unlike local businesses, which are limited to smaller markets.

How does globalization threaten cultural diversity?

Globalization spreads mainly Western media, which can overshadow local cultures and languages. Traditional jobs like farming or crafts often can't compete with mass production, leading to cultural loss. In tourism, communities may change or simplify traditions to attract visitors. This results in cultural homogenisation—where many cultures start to look and act the same, reducing global cultural diversity.

How does globalization affect a country's sovereignty?

Globalization can make countries dependent on global trade, so they can't make decisions just for their own people. If they try, they might hurt their economy. Global capital can move quickly in and out, which makes it hard for countries to control their money or economy. Also, international rules might force them to follow global standards, even if those rules go against local needs.

Why can migration cause social tensions?

Migration can create tensions due to job competition, especially during economic struggles. Cultural differences in language, religion, or traditions may cause misunderstandings or fear. A sudden increase in migrants can put pressure on public services like healthcare and housing. Politically, migration often causes debates between groups who support or oppose immigration, leading to ideological conflicts.

Is globalization fair for everyone? Why or why not?

Globalization often favors developed countries and large companies more than poorer nations and small businesses. Wealthy countries control trade deals and global organizations, giving them more power. Poorer countries struggle to compete, and globalization can also damage local cultures and weaken national control. So, while it brings benefits, it's often unfair and increases global inequality.

What can be done to make globalization fairer?

Globalization can be fairer if trade rules support developing countries and if local businesses receive financial support. Cultures should be protected, and migration managed fairly to avoid conflict. Also, poorer countries need more influence in global organizations to help shape fairer rules and decisions that reflect their needs.

How are globalization and migration connected?

Globalization increases migration by connecting countries through trade and communication. People move for jobs, safety, or education. But if not managed well, migration can cause social tension and political conflict. Good migration policies can help both migrants and locals while encouraging cultural understanding.

Do multinational companies help or hurt local economies?

Multinational companies can help by creating jobs and investing in local areas, but they often hurt local businesses. They have more money and power, dominate markets, and may take profits abroad. Without proper rules, they can reduce local economic opportunities and influence government policies in their favor.

Who benefits the most from globalization and why?

Multinational corporations gain profits through cheap labor, low taxes, and global markets. Developed countries benefit due to their powerful role in trade and finance. Emerging markets get new jobs and growing economies. Consumers enjoy cheaper and more diverse products. Skilled workers have better income and job options. These groups benefit because they have the resources, systems, or skills to take advantage of globalization.

How has globalization helped reduce poverty and disease?

Globalization spreads technology and industrial growth to developing countries, creating jobs and improving incomes. This lowers poverty, especially in emerging economies. It also helps countries share medical knowledge, treatments, and vaccines. Diseases that were once common in poor countries can now be treated or eliminated thanks to global health programs and cooperation.

In what ways can globalization help keep peace between countries?

When countries trade with each other and invest money across borders, they depend on each other. Starting a war would damage both their economies. This economic connection makes war less likely. As countries become more linked, they try to solve problems through diplomacy and international cooperation instead of fighting.

Do you believe trade has mostly changed or mostly stayed the same over time?

Trade has mostly changed over time, especially due to globalization, technology, and international cooperation.

In the past, trade was limited to nearby regions and was mostly about exchanging basic goods like spices, textiles, or metals. Today, trade is global, involving complex products, digital services, and global production chains. Multinational companies now produce goods in many countries and sell them worldwide. The internet, shipping containers, and faster transport have made trade quicker and more efficient.

Also, international organizations like the World Trade Organization (WTO) and trade agreements have made rules to support free trade, which didn't exist centuries ago.

So even though the basic idea of trading goods and services has stayed the same, the scale, speed, and structure of trade have changed a lot.

market equilibrium

A market is at equilibrium when the quantity demanded=quantity supplied at a price that clears the market. This is the equilibrium price.

Law of supply

If price increases, quantity supplied also increases. Direct relation

Law of demand

If price decreases, quantity demanded increases. Inverse relation

Causes of demand curve shifts

Changes in: consumers income, price of other related goods, number of buyers and consumer expectation and demographics

Causes of supply curve shift

Changes in : producer expectations, technological advancements, no. of sellers and input prices.

•Balance of trade

.is the difference between a country's exports and imports of goods.

Trade Deficit:

When a country imports more than it exports.

Trade Surplus

When a country exports more than it imports.

•Opportunity Cost

: the loss of other alternatives when one alternative is chosen.

What is a supply chain?

A supply chain is a connected system of organizations, resources, activities and technologies that work together to produce and deliver a good or service to the customer. It essentially covers all the steps to take a good from creation to customer covering all the step from sourcing raw materials, manufacturing the product, transporting and storing it, managing inventory to finally selling it to the customer.

What are the 4 stages of a supply chain

1) Sourcing- Materials and services required to produce the product are sourced from suppliers

2) Manufacturing- Product is assembles

3) Distribution- Assembled product is transported to distribution centers around the world

4) Retail: Product is sold to customers through various platforms

Why is it important that a supply chain is effective and efficient?

A well managed supply chain, minimizes costs and maximizes profit as it reduces waste and delays, and improves competitiveness of a business along with a smooth flow of operations. It also ensure the products reach the customers on time at the right quality and right quantity, meeting the customer demands and building customer loyalty and satisfaction.

Physical geography

Affects trade as mountains, terrains and waterbodies determine how goods are transported. Poor climate can stop or slow down transport and natural resources determine where trade routes start and go.

What are reshoring, nearshoring and regionalization? Are they effective business practices?

Nearshoring: means moving production closer to where products are sold to reduce shipping time and costs.

Reshoring means bringing manufacturing back to the original home country.

Regionalization means setting up factories in different world regions to supply nearby markets and reduce risks.

Yes, they can be effective because they cut transportation time and costs, improve supply chain reliability, and reduce risks from global disruptions. But they might increase labor or production costs, so their success depends on the company's priorities and situation.

mercantalism

Mercantilism created barriers to international trade. It aimed to maximize exports, minimize imports, and increase the country's supply of gold.

Define protectionism

Protectionism is a defensive often politically motivated policy, aimed at reducing competition for local inducted, workers and business. It is the total opposite of free trade- which is the complete absence of restrictions on international trade. Historically, developing nations adapt protectionist policies under the argument of "infant industries" which believes industries need time to grow strong enough to compete globally. However, this often leads to increased prices for consumers and reduced trade, ultimately harming economic growth and employment

Types of protectionism

i) Tariffs- Taxes imposed on imported goods

ii) Import Quotas- Limit the amount of a particular good that can be imported

iii) Embargos: Trade bans with specific countries (form of political pressure)

iv)Non Tariff Barriers - Regulatory barriers like quality checks, safety standards, labeling requirements etc.

v) Content requirement checks: Certain percentage of the product must be sourced or manufactured domestically

vi)Subsidies- Financial support provided by the government to local businesses and industries

Effects of Protectionism

i) Increase in prices of goods and services, leading to inflation

ii)Trade tensions between countries can lead to political instability and uncertainty

iii) Limited market access for businesses can impact global markets and growth of businesses

iv) Protectionist trade policies can lead to slower Economic growth

v) Shift in trade flows from one country to another

Who benefits from protectionist policies?

Domestic industries and workers in the short term

Who is harmed from protectionist policies

Customers due to high prices, long term economic efficiency due to reduced overall trade and competition, foreign businesses due to limited market access and exporters.

What is a long-term downside of protectionism?

It can reduce innovation, hurt consumers, damage international trade relations, and cause trade wars.

What did Trump do in the 2018 trade war?

He imposed tariffs on hundreds of billions of dollars of imports, mainly targeting China, to reduce the trade deficit and counter unfair practices.

How did other countries react to Trump's tariffs?

Countries like China, Canada, Mexico, and the EU retaliated with their own tariffs on U.S. goods.

What was one effect of Trump's tariffs on China?

China's exports to the U.S. declined, slowing their economic growth and pushing some companies to relocate production elsewhere.

Do you think protectionism is more helpful or harmful to an economy? Justify your answer.

While protectionism can help certain industries and protect jobs in the short term, it often leads to higher consumer prices and reduced global competitiveness. In the long run, free trade may be more beneficial for economic growth and innovation.

Was Trump's use of tariffs an effective strategy? Why or why not?

Trump's use of tariffs had mixed results and was mostly ineffective in the long term. His goal was to protect American industries and reduce unfair trade with countries like China. While some U.S. industries, such as steel, did benefit from less foreign competition, many businesses struggled with higher costs for imported materials. Other countries, like China and the European Union, responded by placing tariffs on American products, which hurt U.S. farmers and exporters. Consumers also had to pay more for certain goods.Overall, although the tariffs were meant to help the U.S. economy, they created trade tensions, disrupted supply chains, and harmed both businesses and consumers.

Trade Liberalization

Removing or reducing trade barriers to encourage free exchange of goods between nations

Trans-Pacific Partnership (TPP)

The TPP was a trade agreement between 12 countries, including the U.S., Japan, and Australia, aiming to lower trade barriers and boost competition. However, the U.S. never ratified (officially approved) the deal due to political controversy, so it didn't join in the end.

Income inequality

unequal distribution of income among different social groups of a population

What is one major cause of job loss in developed countries due to globalisation?

Outsourcing to countries with cheaper labour

Name two factors (besides globalisation) that increase income inequality.

Automation and technological change

Gender and racial bias in wages

How can foreign aid benefit the country that gives it?

It can strengthen political alliances, prevent future conflicts, and open up trade opportunities for the donor country, it can also prevent instability that could affect global peace or trade.

Evaluate the effects of globalisation using one positive and one negative piece of evidence.

Globalization has had both positive and negative effects on the world economy. For example, global trade lifted millions out of poverty in developing countries. However, outsourcing led to the loss of stable jobs for middle-class workers in Western countries. This shows that while globalization can promote economic development and poverty reduction, it can also increase income inequality and social instability.

High levels of innequality

poor health, low education attainment, lower productivity, slow unstable economic growth and less investors

What effect has globalisation had on working-class jobs in the U.S. and Europe?

Globalisation led many companies to move manufacturing jobs to countries with cheaper labour. As a result, many working- and middle-class Americans and Europeans lost secure, often generational, jobs and incomes.

How have advances in technology contributed to income inequality?

Automation has replaced many blue-collar jobs, leading to job losses and lower wages for less educated workers, increasing the income gap.

How do economic conditions influence income inequality?

During times of financial crisis, unemployment rises and business investment slows, leading to reduced incomes and increased inequality.

Why hasn't taxation reduced income inequality?

Even though high-income earners pay more in taxes, some tax policies—like lower capital gains tax and corporate tax cuts—favour the wealthy, allowing inequality to continue increasing.

Explain how globalisation and technology together contribute to income inequality.

Globalisation shifts jobs to countries with cheaper labour, and technology replaces human workers through automation. Together, they reduce job opportunities and wages for less-educated workers, especially in developed countries, widening income inequality.

Evaluate one limitation of using only taxation to reduce income inequality.

One limitation is that tax systems may still benefit the wealthy through policies like low capital gains taxes and tax cuts for corporations. So even if high earners pay more in percentage terms, they still retain significantly more wealth.

Suggest one way governments could reduce income inequality besides taxation.

Governments could invest in education and vocational training to help lower-income workers gain skills needed for higher-paying jobs, reducing the wage gap over time.

causes of income inequality

i) Globalization resulted in move of manufacturing and other jobs by corporations to countries with lower labor costs

ii) Gender and race bias - income disparities for women and people of color

iii) Poor economic conditions with financial turmoil, unemployment and slowing business investments can impact income

iv) Technological advancement like automation have lead to lob losses for blue collar workers and lower wages for less educated workers

v)Education below high-school earn less and experience less growth in wages

vi) Taxation - while higher income pay higher taxes, certain tax policies benefit those with higher income more than those with lower income

Explain one reason foreign aid might be controversial.

Some argue it is used as a political tool—countries might give aid to gain influence or access to resources, rather than purely to help others.

What are the value and limitation of foreign aid as a policy tool?

Value: It helps save lives, rebuild economies, and build alliances. Limitation: It may create dependency or be used to serve the donor's political interests rather than the recipient's actual needs.

What is foreign aid?

Foreign aid is any type of assistance a country provides to another in forms of capitol, goods, food, supplies, or services like humanitarian aid and military assistance. Developed nations may provide developing countries with foreign aid after natural disaster, in times of conflict or economic hardship. The UN requires countries to spend 0.7% of their gross domestic income on giving foreign aid, as it is not just about charity but also serves a strategic purpose helping countries build alliances and prevent future wars.

Evaluate the impact of globalisation on workers in developing countries.

Globalisation has helped create jobs in developing countries, especially in industries like textiles and electronics. Workers can earn regular incomes and move out of poverty. However, many of these jobs come with poor conditions, low pay, and few rights. So while globalisation gives opportunities, it also leads to unfair treatment and expolitation of many workers in developing countries.

Is globalization a good thing?

Globalization has both positive and negative impacts. On the positive side, globalization has led to economic growth for many countries, reducing poverty and creating a new middle class as more investments and exports have been made. It has lead to more innovation through higher competition and life saving medical advances along with technological advances. Worldwide consumers also benefit from a larger variety of goods available at cheaper prices. Educated and skilled workers also have the power to gain higher wages and they are able to move to higer-income economies However, globalization has also lead to increased income inequality as people in developed nations face job losses and workers in developing nations face exploitation. The increased production and transport is also harmful to the environment. There are still land locked countries who struggle to benefit at all and some nations face increasing economic and social pressures from migration.

Evaluate globalization

Globalisation has increased trade, investment, and economic growth in many developing countries, creating jobs and reducing poverty. Consumers benefit from cheaper goods and more variety. However, it has also caused job losses in developed nations, widened inequality, and harmed the environment through increased production and transport. Some poorer or unstable countries struggle to benefit. Overall, globalisation has had significant positive effects, but these are not equally shared.

valuate the impact of globalization on workers in developing countries.

Globalization has helped create jobs in developing countries, giving people the opportunity to move out of economy. However, these jobs often exploit these workers especially in manufacturing jobs through poor working conditions and low wages.

"Globalisation only benefits the rich." To what extent do you agree?

Globalization greatly benefits the rich like Multi national companies and wealthy individuals through certain tax policies, international market access and opportunities making them the biggest winners of globalization. However, millions of people also see an improvement in their life due to globalization and reduced poverty and the formation of a new middle class. Therefore, despite the inequality in the benefits, globalization does not ONLY benefit the rich.

How does globalisation affect different regions within the same country?

Globalization benefits major cities where global companies set up offices, but leaves poorer or rural regions behind. Local businesses can't compete with powerful multinationals, and jobs in smaller towns may disappear. These companies often listen more to international investors than local people or governments, weakening national control. So globalization deepens regional inequality and limits local decision-making.

Evaluate how globalisation affects national identity and culture.

While globalization connects people, it can pose a threat to cultural diversity as western cultures dominate cultural influence through media, making the world more uniform to fit the westen standard.

Has globalization had a more positive or negative impact on developing countries?

it has had a mixed effect but impact has been more positive. for example it hepled stimulate ecomic growth and more job opportunities reducing poverty but it also lead to exploitation of workers and compromise nations soveringthy.

Compare free trade and protectionism. Which is more sustainable long-term?

While protectionist policies are adapted to protect local industries from competetion. In the long run it reduces overall trade and slows down economic growth of the nation

How do supply chain disruptions (e.g. COVID-19) impact global trade?

Shipping delays cause increased costs and distrupts chain for months

How do cultural and language barriers affect international trade?

These barriers can cause confusion in trade deals and negotiotions. Make advertising less effective and difference in buisness etiquete can be offenseive and confusing.

The law of supply and demand is the foundation of all trade." Agree or disagree?

I partly agree with this statement as it does have a great influece on the price and which product is traded how much. other factors like political, social and econimical factors also play a large roll in inflencign trade. Hence its a key factor but not the only one.

has globalization connected or divided ?

Globalization has brought people and places closer together by spreading industrial technology and medical advancements across countries, improving lives and boosting development. It also creates more job opportunities for skilled workers, who can move to stronger economies and build better futures. As markets become more interdependent, countries rely on each other through trade and cooperation, leading to closer global ties. However, globalization also has downsides. It can threaten cultural diversity as global brands and values replace local traditions. Large-scale migration can lead to social tensions in some regions, and international trade agreements may reduce a country's control over its own economy. Still, the benefits of connection, innovation, and opportunity show that globalization has mostly brought people and places closer together.