topic 1.5: business and the international economy

What is globalization?

• A) The process of businesses operating only in their home country

• B) The process of businesses becoming more international and interconnected

• C) The reduction of international trade

• D) The elimination of all international business

• E) The process of moving production to local markets

B - The process of businesses becoming more international and interconnected

Which of the following is an opportunity of globalization for businesses?

• A) Increased competition from foreign firms

• B) Access to new markets and customers

• C) Higher production costs

• D) Reduced profit margins

• E) Lack of skilled workers

B - Access to new markets and customers

Which of the following is a threat of globalization for businesses?

• A) Access to cheaper resources

• B) Access to new markets

• C) Increased competition from foreign businesses

• D) Lower labour costs

• E) Economies of scale

C - Increased competition from foreign businesses

A benefit to a country where a multinational is located is:

• A) Profit repatriation to the home country

• B) Job creation and employment

• C) Environmental damage

• D) Exploitation of local workers

• E) Loss of cultural identity

B - Job creation and employment

A drawback to a country where a multinational is located is:

• A) Job creation

• B) Investment in infrastructure

• C) Profit may be repatriated (sent back to the home country)

• D) Training of local workers

• E) Technology transfer

C - Profit may be repatriated (sent back to the home country

If the value of the pound (£) increases against the US dollar ($), what happens to UK exporters?

• A) Their goods become cheaper in the USA

• B) Their goods become more expensive in the USA

• C) There is no effect

• D) They sell more goods

• E) They make higher profits

B - Their goods become more expensive in the USA (a stronger pound makes UK exports more expensive for foreign buyers)

If the value of the pound (£) decreases against the euro (€), what happens to UK importers?

• A) They pay less for goods from Europe

• B) They pay more for goods from Europe

• C) There is no effect

• D) Their costs decrease

• E) They make higher profits

B - They pay more for goods from Europe (a weaker pound makes imports more expensive)

The process of businesses becoming more international and interconnected is called ____________________.

Globalization

A ____________________ is a business that has operations in more than one country.

Multinational

What is globalization?

The process by which businesses and economies become increasingly international and interconnected through trade, investment, and technology.

What are the opportunities of globalization for businesses?

• Access to new markets and customers

• Access to cheaper resources and labour

• Economies of scale

• Access to new technology and innovation

• Diversification of risk

What are the threats of globalization for businesses?

• Increased competition from foreign businesses

• Pressure to reduce costs

• Currency fluctuations

• Cultural and language barriers

• Political instability in foreign markets

What are the benefits of becoming a multinational?

• Access to new markets

• Lower production costs (cheaper labour/resources)

• Economies of scale

• Spread risk across different markets

• Bypass trade barriers

What are the benefits to a country of hosting a multinational?

• Job creation

• Investment in infrastructure

• Technology transfer

• Training for local workers

• Tax revenue

What are the drawbacks to a country of hosting a multinational?

• Profits may be repatriated

• May exploit local workers

• Environmental damage

• May create dependency

• Local businesses may be unable to compete

What is the impact of exchange rate changes on importers?

• Strong domestic currency: Imports become cheaper

• Weak domestic currency: Imports become more expensive

What is the impact of exchange rate changes on exporters?

• Strong domestic currency: Exports become more expensive (less competitive)

• Weak domestic currency: Exports become cheaper (more competitive)