Eco HW:

Task 1:

1. What is globalization?

the process by which businesses or other organizations develop international influence or start
operating on an international scale.

2. What is FDI?

(foreign Direct Investment) FDI is the investment made by a company or individual from one country
into business interests located in another country.

3. What is an MNC?

(Multi National Corporation) is a large business that operates in many different countries. They play a
key role in globalization as they contribute to the flow of goods and services across borders.

4. What is the difference between an open and closed economy?

A closed economy is an economy that doesn’t interact with other economies in the world such as
North Korea. Where as and open economy interacts with trade in exports and imports, investments
and so on.

5. What has happened to the global volume of international trade over the last 50 years?
Why?

It increased because of the advancement in technology and communication between countries

6. What is the WTO and what rule does it serve in impacting global trade?

(world trade organization) is an international organisation that deals with the global rules of trade
between nations.
Task 2:

One factor that has caused globalization to increase in the past years on the decrease in
transportation costs. One example is over the last 25 years, sea transport costs have decreased by
70% and air transport costs decreased by 4-4 % . Due to the fact the transport costs have massively
dropped, it allows the transportation of goods and services across the world easier and in a larger
proportion which is a leading cause to the increase in globalization. Another factor which has caused
an increase in globalization is the development in technology such as the growth of the internet. The
internet acts as a 24 hour shop consumers from all over the world the browse and buy products
online. This allows businesses to operate globally, connect with consumers worldwide and manage
global supply chains. Furthermore, the internet has allowed the spread of media, culture, music and
more all around the world which leads to a greater interconnection between countries. Another
factor which has caused globalization are Multinational Cooperations (MNCs). Large cooperations
have expanded their operations globally to access new markets, more resources and more labour.
MNCs operate in multiple countries which leads to mass globalization in those countries, an example
of this would be McDonalds operating in USA and different places such as Thailand. This goes with
every other good and service transported through trade. This could be anything such as Coca-Cola,
Apple, H&M and so on.

Globalization has had a huge impact on countries affecting the economic, social, cultural and political
aspects. These impacts are both positive and negative but can vary with developing and developed
countries. In developed economies a positive impact is the market range. This means that
globalization can lead to a larger market with higher demand which can increase a countries trade
across the world. This can increase the amount of goods and services towards consumers which
could be cheaper alternatives creating a better standard of living due to the affordability. However,
one negative impact globalization on developed countries is income inequality. While globalization
can boost overall economic growth, in developed countries by increasing the imports of
manufactured goods using predominantly low-skilled labour from developing countries. One positive
impact globalization has on developing countries is that globalization attracts FDI (Foreign Direct
Investments) to developing economies. These investments can cause infrastructural development,
job creation and economic growth. An example of this would be McDonalds investing in an Asian
country to increase the number of stores in the region. Towards consumers, it increases employment
and produces a source of income in small communities which can increase standard of living.
Furthermore, the government can uses these investments to also invest in infrastructure such as
hospitals and schools which can lead so slow economic growth. However, one negative this has is it
developing countries depend on global markets. Developing countries may become over reliant on
global markets making them venerable to economic decline which can lead to recessions leading to
poverty and a low SOL.

Globalization has contributed to the rising inequality within economies. Especially in advanced or
developed economies by negatively affecting wages and jobs of lower-skilled workers in tradable
sectors. Conversely, more opportunities for exports in high-tech firms that use more high skilled
labour. These two factors widen the gap between high skilled and low skilled workers which widens
the income inequality gap. Companies in developed countries often outpost there manufacturing
sector in different countries due to low labour costs. While this can lead to cost saving for businesses,
it can also result in job losses and wage stagnation in the developed country leading to income
inequality, and example of this would be the USA building lots of factories in China for cheap labour
costs and better environmental conditions in the US. However this can lead to an increase in
unemployment in the manufacturing sector in the US thus leading to income inequality.
MNC’s have played a significant role in increasing globalization. MNCs operate in multiple countries
facilitating the exchange of goods and services and capital across borders. They invest in foreign
markets, establish subsidiaries and engage in international trade causing globalization. MNC’s also
create loads of supply chains all over the world to optimize growth. They demand and use raw
materials, components and labour from different countries contributing to globalization. Also, MNCs
operate in diverse cultural contexts, leading to a blending and exchange of cultural elements. This
can be seen in the spread of global brands, consumption patterns and the influence of popular
culture on a global scale. For example only a few countries like North Korea or Bhutan are the only
countries reported to not have any jeans (a very western example of globalisation). On the other
hand, globalization has led to an increase in the number of MNC’s. MNCs seek to expand their
market reach beyond national borders. Globalization has opened up new opportunities for
businesses to tap into larger and more diverse consumer bases around the world. Furthermore,
Many countries have reduced barriers to international trade, making it easier for MNCs to operate in
different regions. Trade agreements and treaties have played a significant role in facilitating cross-
border business activities.

Countries seek to attract FDI’s and MNC’s into their economy for many reasons. One reason being
FDI can contribute significantly to the economic growth by providing a source of capital, technology
and a possible increase in employment. MNC’s can bring a global innovation to small developing
countries allowing competitiveness and efficiency in local industries. Furthermore, by installing
foreign businesses it can generate employment opportunities reducing unemployment and improve
overall standards of living. However, one negative aspect is the risk of economic dependency.
Overreliance on FDI and MNC’s may make a country venerable to global economic fluctuations.
Additionally, there is also the risk of potential risk of exploitation of the host country's resources,
cheap labour and environmental affects by MNC’s which may lead to social and environmental
issues. Another downside is the possibility of increased income inequality, as the benefits of FDI and
MNCs might not be evenly distributed across the population.

In conclusion, globalization is the process by which businesses or other organizations develop