Business and The International Economy

Gross Domestic Profit (GDP)

measure of output of products created within country

Tariff

type of tax that is paid on goods that are imported and exported

Quota

physical limit on quantity of goods that can be imported and exported

Globalisation

process of integrating economies, cultures, and policies across borders increasing interconnectedness due to international trade and technological advancements

Protectionism

when governments protect domestic firms from foreign competition by imposing trade barriers

Exchange rate

value/ price of one currency in terms of another currency

free trade agreement

agreement between countries allowing them to import and export goods with no tariffs

Multinational Company (MNC)

business that operates in more than one country

advantages of GLOBALISATION

• increase in number of free trade agreements

• enhances competition creating market opportunities

• fosters innovation

• cheaper materials and labour

• increases sales and profits

disadvantages of GLOBALISATION

• domestic firms cannot compete

• investment taken from local firms

• employees may leave local firms

why do companies become MNCs?

• produce goods at lower costs

• extract raw materials

• produce goods nearer to materials

• avoid trade barriers

• remain competitive with rivals

advantages of MULTINATIONAL COMPANIES for host country

• more jobs

• increases GDP

• brings innovation

• MNCs pay tax so government tax revenue increases

disadvantages of MULTINATIONAL COMPANY for host country

• unskilled jobs given to locals while skilled jobs are given to people from country of origin

• local firms may be forced out of business

• scarce/ non-renewable resources get used up

• repatriation of profit

• influence over government and economy

Repatriation of profit

the return of profits to country of origin

which organisation is responsible for promoting free trade globally?

World Trade Organisation (WTO)

disadvantage of FREE TRADE

increased competition for domestic businesses

advantage of MULTINATIONAL COMPANY for business

access to larger customer base