Life in a Global Economy

What Life in a Global Economy covers

Life in a Global Economy is examined in Paper 2, Competing in the global economy, and in Paper 3, The economic environment and business. It covers characteristics of globalisation, causes of globalisation over the last fifty years, growth in the UK and the BRIC economies, indicators of growth and development, developed, emerging and developing economies, mean and median incomes, specialisation and the gains from international trade, trading blocs, visible and invisible trade and the impact of cheap imports, exchange rate changes and their impact on firms and reading exchange rate and effective exchange rate data.

The 11 subtopics

Each one has its own page.

• Characteristics of globalisationGlobalisation and its characteristics, foreign direct investment against portfolio investment, world trade growing faster than output, global supply chains, migration and its benefits to firms and costs to receiving countries, transnational companies, remittances, and vulnerability to shocks.Open →
• Causes of globalisation over the last fifty yearsTrade liberalisation, the World Trade Organisation and falling tariffs, capital market liberalisation and the removal of exchange controls, the opening of China and the collapse of the Soviet Union, containerisation and transport costs, cheaper communications and offshored services, transnational companies, and why liberalisation can reverse.Open →
• Growth in the UK and the BRIC economiesRecall questions on the BRIC economies and how their growth compares with the United Kingdom's, catch-up growth, why Brazil and Russia slowed, and UK output and productivity after 2008.Open →
• Indicators of growth and developmentGDP per capita and calculating it, purchasing power parity, why GDP per capita can overstate living standards, adult literacy, health indicators and life expectancy, the three dimensions and range of the Human Development Index with its advantages and gaps, and why investors look beyond income.Open →
• Developed, emerging and developing economiesThe characteristics of developed, emerging and developing economies, the shift from agriculture to manufacturing and services, labour markets in developing economies, volatile and slow growth, why exporters target emerging economies, population structure, the informal economy and unreliable GDP figures, and classification as judgement.Open →
• Mean and median incomesCalculating mean and median income, why the median is usually lower and a better guide to the typical household, a widening gap between them, rising mean income that households do not feel, choosing a measure for a retailer, relative poverty and the median, modal income, and comparing countries.Open →
• Specialisation and the gains from international tradeSpecialisation in international trade, absolute and comparative advantage and their sources, lower average costs, the terms of trade and their index, trade and economic growth, import competition and productivity, the risks of over-specialisation, wider consumer choice, and the unequal distribution of gains.Open →
• Trading blocsTrading blocs, free trade areas, customs unions, single markets and monetary unions, trade creation and trade diversion and its welfare cost, the benefits and costs of joining a customs union, rules of origin, monetary union across different economies, blocs against global free trade, and border paperwork for UK exporters.Open →
• Visible and invisible trade and the impact of cheap importsVisible and invisible trade, the balance of trade in goods, the pattern of UK trade and calculating the overall trade balance, the other current account components, how cheap imports raise living standards and help manufacturers, their costs to the domestic economy, dumping, and inflation targets.Open →
• Exchange rate changes and their impact on firmsExchange rates, depreciation against devaluation, the demand for a currency and Bank Rate, speculation, the effect of appreciation and depreciation on export and import prices and calculating them, why depreciation may not help exporters, the Marshall-Lerner condition and J-curve, hedging, and volatility and investment.Open →
• Reading exchange rate and effective exchange rate dataRecall questions on the effective exchange rate and its weighting, what an index of 100 means, calculating appreciation and depreciation, and reading a quoted rate the right way round.Open →

What you need to know

Answer each one before you reveal it.

Take Life in a Global Economy further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Foreign direct investment vs Portfolio investment

  Foreign direct investment: spending by a firm to acquire a lasting controlling interest in a productive asset located in another country. Portfolio investment: buying shares or bonds abroad purely for a financial return, with no control over the business.

• Emerging economy vs Developing economy

  Emerging economy: a country industrialising rapidly, with fast growth, rising incomes and an expanding middle class, though income per head is still below developed levels. Developing economy: a country with low income per head, much of its employment in agriculture or the informal sector, and weak infrastructure and public services.

• Mean income vs Median income

  Mean income: total earnings divided by the number of people receiving them, which a small number of very high earners pulls upward. Median income: the figure earned by the middle person when everyone is ranked from lowest to highest, so half are above and half below.

Questions from this topic

Each one with the model answer underneath.

1. 1

   What is meant by globalisation?

   Model answer

   Globalisation is the increasing integration of national economies into a single world market, so that goods, services, capital, labour and ideas move more freely across borders.

2. 2

   Name three characteristics that show the world economy has become more globalised.

   Model answer

   Investment flows between countries have increased, world trade has grown as a proportion of world GDP, and migration between countries has risen.

3. 3

   What is foreign direct investment?

   Model answer

   Foreign direct investment is spending by a firm to acquire a lasting controlling interest in a business or productive asset located in another country.

4. 4

   How does foreign direct investment differ from portfolio investment?

   Model answer

   Foreign direct investment buys a controlling stake in overseas productive assets, whereas portfolio investment buys shares or bonds abroad purely for a financial return with no control over the business.

5. 5

   Why has world trade grown faster than world output over the last fifty years?

   Model answer

   Falling trade barriers and transport costs have made buying abroad cheaper, and firms have split production into global supply chains so components cross borders several times before the finished good is sold.

6. 6

   What does it mean if world trade rises as a proportion of world GDP?

   Model answer

   It means the value of exports and imports is growing faster than total world output, so a larger share of what the world produces is sold across a national border.

What is inside Levo

Six ways to work the same material.

Life in a Global Economy revision questions

What does Life in a Global Economy cover in Edexcel A-Level Economics B?

11 subtopics: characteristics of globalisation, causes of globalisation over the last fifty years, growth in the uk and the bric economies, indicators of growth and development, developed, emerging and developing economies, mean and median incomes, specialisation and the gains from international trade, trading blocs, visible and invisible trade and the impact of cheap imports, exchange rate changes and their impact on firms and reading exchange rate and effective exchange rate data. Each one has its own page with questions and model answers.

How is Life in a Global Economy organised?

By the Edexcel 9EB0 specification, subtopic by subtopic, so it matches the order you are taught it in.