Exam code: 0450, 0986 & 0264, 0774
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Define globalisation.
Globalisation is the economic integration of countries through increased cross-border movement of people, goods and services, technology and finance.
Define multinational company (MNC).
A multinational company is a business registered in one country that has manufacturing, processing and/or service outlets in many different countries.
What is an import?
An import is a good or service bought by people and businesses in one country from another country.
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Define globalisation.
Globalisation is the economic integration of countries through increased cross-border movement of people, goods and services, technology and finance.
Define multinational company (MNC).
A multinational company is a business registered in one country that has manufacturing, processing and/or service outlets in many different countries.
What is an import?
An import is a good or service bought by people and businesses in one country from another country.
What is an export?
An export is a good or service sold by domestic businesses to people or businesses in other countries.
True or False?
Exports generate extra revenue for foreign businesses.
False.
Exports generate extra sales revenue for domestic businesses selling their goods abroad, not foreign businesses.
Which four factors have contributed to rapid globalisation?
The four main factors are improved transport links, technological change, free trade agreements, and the growth of newly industrialised countries.
How can multinational companies avoid import tariffs?
Multinational companies can avoid import tariffs by setting up production facilities in countries with protectionist policies, allowing them to sell goods locally without facing tariffs.
What is transfer pricing and how do MNCs use it?
Transfer pricing is a method used by MNCs to shift profits to countries with lower tax rates, reducing their overall tax liabilities and depriving host countries of tax revenue.
True or False?
MNCs always improve consumer choice in the host country.
False.
In the long run, MNCs can push domestic businesses out of the market, reducing consumer choice and possibly resulting in higher prices and lower quality products.
How does globalisation help businesses access new resources?
Globalisation allows businesses to import products not available locally or build facilities near key resources, expanding their product range and potentially reducing transport costs.
True or False?
By exporting to new countries, a business can reduce its reliance on a single market.
True.
Exporting to new countries increases sales revenue and spreads risk, so a business is less dependent on any one market.
What is foreign direct investment (FDI) and how does it benefit a host country?
Foreign direct investment (FDI) is when a multinational company invests in a country, bringing an inflow of money that can enrich local firms or citizens and boost economic growth if reinvested.
How can multinational companies improve the balance of payments for a host country?
Multinational companies can improve the balance of payments by exporting goods and services from the host country, generating inflows of money.
True or False?
MNCs often help transfer technology and skills to domestic businesses.
True.
MNCs bring new technologies and skills that can improve efficiency, productivity, and competitiveness of domestic businesses.
What are economies of scale and how do they benefit multinational companies?
Economies of scale refer to the cost advantages MNCs gain by increasing output across global operations, resulting in lower average costs and improved efficiency.
By setting up production facilities closer to customers, multinational companies can reduce costs and speed up delivery times.
By setting up production facilities closer to customers, multinational companies can reduce transportation costs and speed up delivery times.
True or False?
Multinational companies can avoid import tariffs by setting up production within protectionist countries.
True.
By producing goods inside countries with protectionist policies, MNCs can avoid import tariffs that would apply to foreign-made goods.
MNCs can help improve the of a country by exporting goods and bringing in foreign investment.
MNCs can help improve the balance of payments of a country by exporting goods and bringing in foreign investment.
How can multinational companies benefit consumers in the countries where they operate?
Consumers may benefit from higher quality, lower prices, and a wider choice of goods and services due to the presence of MNCs.
True or False?
The presence of multinational companies always increases consumer choice in the host country.
False.
In the long run, MNCs may push domestic businesses out of the market, reducing consumer choice and potentially leading to higher prices or lower quality.
Define external costs.
External costs are unwanted side effects of business activity that affect people or the environment outside the business, and are not paid by the business but by society.
What are two possible consequences for a business if it fails to address external costs?
A business that fails to address external costs may face public pressure, government regulation, or reputational damage, which can negatively impact its profits or operations.
True or False?
External costs are always paid for by the business that causes them.
False.
External costs are not paid by the business but by society.
Give one example of how business activity can lead to noise pollution.
Factories, airports, or construction projects can create disruptive noise pollution for local residents, such as constant aircraft noise near Soekarno-Hatta International Airport in Indonesia.
Large out-of-town retail parks can increase , causing longer travel times for others.
Large out-of-town retail parks can increase traffic congestion, causing longer travel times for others.
Define external benefits.
External benefits are advantages provided by a business’s activities to people or the environment outside the business, not paid for by those who receive them.
How can a business create external benefits for a local community?
A business can create external benefits by providing jobs, improving infrastructure, offering training, or supporting local services such as schools or hospitals.
True or False?
External benefits can improve a business’s reputation and relationships with local communities.
True.
External benefits such as job creation and community support can build good relationships and improve a business’s reputation.
Define exchange rate.
An exchange rate is the value of one currency expressed in terms of another.
Define exchange rate appreciation.
Exchange rate appreciation is when the value of a currency rises due to increased global demand.
Define exchange rate depreciation.
Exchange rate depreciation is when the value of a currency falls due to decreased global demand.
Give one reason why exchange rates fluctuate.
One reason exchange rates fluctuate is changes in the demand for a currency.
How does currency appreciation affect importers?
Currency appreciation makes imports cheaper for businesses, lowering their costs.
How does currency depreciation affect exporters?
Currency depreciation makes exports cheaper for foreign customers, which can increase sales for exporters.
True or False?
When a currency appreciates, exports become relatively cheaper for foreign buyers.
False.
When a currency appreciates, exports become more expensive for foreign buyers.
What might a business do if imports become more expensive due to currency depreciation?
If imports become more expensive, a business may seek domestic suppliers to reduce costs.