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Define the following: Globalisation an expansion of world trade leading to increased international interdependence GDP The value of goods and services produced in a country in a period of time Economic Growth An increase in the total value of goods and service produced in a country in a period of time. Measured by the change in GDP Interdependence How the performance of one economy affects the performance of another

Explain how the growth rate of China affects the growth rate of other countries (4 marks) As China produces more goods and services, it needs more raw materials such as copper. Hence countries like Zambia may see higher growth As China grows, incomes increase. Therefore there may be more demand for goods, from developed countries such as the UK HOWEVER As it develops it may start producing goods, that compete with goods that countries such as the UK produce. This may harm growth What does figure 1 suggest about the growth rates of China and the USA between 1990 and 2014 (4 marks) It suggests that the Chinese growth must be higher than in the USA The US was a bigger economy in 1990. China is the biggest economy in 2014. Therefore China must have grown faster

Suggest some possible reasons why China has grown so strongly Global economy has been growing, so more demand for Chinese goods China specialising in production of manufactured goods where it has an absolute advantage Chinese government has invested heavily in education and infrastructure

Does the data in figure 1 suggest that people on average are richer in China than the USA? Explain your answer (6 marks) The data doesn t suggest this. It suggests that China has a higher GDP but there is nothing on GDP per capita. The population of China is much bigger than the population of the USA. Therefore China s GDP per capita is in fact lower

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Define the following: Exports Goods and services which UK firms provide and sell to people and firms not resident here. They result in money coming in to the country Imports Goods and services provided by firms based overseas to residents of the UK. They result in money leaving the country Balance of Trade The difference between the value of a countries exports and the value of a countries imports

Calculate the UK Balance of Trade in goods with the USA in 2014 (3 marks) = 47959-42505 = 5454 million $ trade surplus Calculate the UK Balance of Trade in goods with the Netherlands in 2014 (3 marks) = 37330-51100 = - 13770 million $ a trade deficit

Compare UK trade with the USA with UK trade with Germany between 2000 and 2014 (4 marks) Exports to Germany grew from.to. Exports to the USA also grew from.to However the growth in exports to the USA was slower. Imports from the USA fell from..to Imports from Germany rose from. To.. Germany overtook the USA to become our biggest trade partner We have a trade deficit with Germany in 2014 of.. We have a trade surplus with the USA in 2014 of.

How might these trade patterns change in the future and why? (4 marks) Imports and exports to the EU countries such as Germany may fall if we leave the single market The depreciating may lead to higher exports and lower imports Trade may grow with other parts of the world if we can negotiate our own trade deals after BREXIT If China continues to grow we may see more exports to China as income grow in China UK Imports from China have increased. Explain one benefit and one cost of this to the UK Economy (3 +3) One benefit is lower prices for UK consumers. This is because China is able to produce manufactured goods at a lower cost due to lower labour costs. Therefore our inflation rate is lower as a result One cost is increased competition for UK firms. For example the steel industry has struggled to compete against cheap Chinese imports. This can lead to job losses, rising unemployment and lower economic growth as result.

To what extent does international trade benefit the UK economy? (8 marks)

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Analyse what has happened to Chinese and Indian exports and imports between 2000 and 2014 Chinese and Indian exports have increased to their top ten export markets For example Chinese exports to the USA have grown from..to. For example Indian exports to the USA have grown from.to. Indian and Chinese imports have also increased For example. Whilst China exports more than it imports this is not the case for India where the value of top ten imports exceeds the value of top ten exports Calculate China and India s balance of trade in goods with the USA in 2000 and 2014 2000 India s balance of trade with USA =$5931 million surplus China s balance of trade with USA = $29786 million surplus 2014 India s balance of trade with USA = =$21262 million surplus China s balance of trade with USA = $242963 million surplus

Explain how international trade has helped the Chinese and Indian economies to grow (6 marks) Trade has allowed them to specialise in producing goods in which they have an absolute advantage and buy in products from other countries. As a result they are able to produce a higher value of output which adds to their growth Trade has given Chinese and Indian firms a larger market for their products. Higher exports add directly to GDP increasing economic growth Trade has allowed them to purchase resources they do not have in their own countries or at a lower cost than they would be able to produce themselves which they use to produce higher value manufactured products. Trade has enabled them to access capital and skills which has increased productivity. As a result they can produce a higher value of goods and services

Discuss to what extent the growth of China and India will benefit the UK economy through international trade (8 + marks)

As China and India grow, incomes rise which means more demand for UK exports. This adds to our value of output and boosts our growth rate. China and India respresent about 40% of global population. There are emerging middle classes in both countries. China is the 2 nd biggest market for luxury goods after Japan Fig 3 and 4 show both countries importing more Lower prices, more choice etc

If they continue to grow costs may rise such as wages which may mean higher prices for UK customers Interdependence As they grow they may start producing products that compete directly with high value UK products job losses, unemployment etc Pollution from China and India, leading to higher C0 2 emissions, global warming, negative externalities however.. Fig 3 and 4 suggests we are not in their top ten imports so UK exports to these countries is limited. BUT we buy lots of goods from them

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Developed Country - a country with a lot of industrial activity and where people generally have high incomes Developing Country - is a nation or sovereign state with a less developed industrial base and a low Human Development Index (HDI) relative to other countries

Compare Zambia s exports to the UK and China between 2000 and 2014 (4 marks) At the start of the period Zambia exported more to the UK than China. In 2005 China overtook the UK and became a bigger export market for Zambia. ( By 2014 the UK had fallen to Zambias 10 th most important export market whilst China had risen to become Zambia s 2 nd most important export market) From 2005 to late 2012 exports to China rose significantly from less than $50 million to almost $2500 million In 2013 exports to China fell from almost $2500 million to $900 million Over the whole period exports to the UK have fallen from $250 million to about $100million Exports to China have grown substantially from almost nothing to just under $1000 million although this is much lower than the peak in 2012

Assess the impact on Zambia s economy and people of the changes in exports 2000 to 2014 (8 marks) Exports have grown up until 2013 which has likely led to more economic growth as output has grown. Tax revenues may have risen as a result, enabling the gov to invest in economic improvements Jobs will have been created in export industries eg copper Living standards for people may have increased Economic growth may not have been inclusive and may not have raised living standards for many Zambians Many of the high paid jobs have probably gone to foreign employees Government may not have invested tax revenue wisely Fall in exports to China from 2013 onwards will have led to lower/negative growth, rising unemployment and falling tax revenues BUT data only shows two countries. We do not have any info on Zambia s biggest trade partner

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Define the following: Demand The amount of a good or service people are willing and able to buy at a price Supply The amount of a good or service suppliers are willing and able provide to the market at a price Excess Demand Where the quantity demanded exceeds the quantity supplied (a shortage) Excess Supply Where the quantity supplied exceeds the quantity demanded (a surplus)

Explain how Chinese demand for copper helps the Zambian economy (6 marks) More Chinese demand for copper means higher exports for Zambia. As a result the value of Zambia s output increases meaning higher economic growth. In addition more workers will be employed mining the copper, this decreases unemployment. Tax revenue gained from taxing copper can be used by the government to invest in education and infrastructure, which enables them to produce more and be more competitive To extract the copper China has invested in improving Zambian infrastructure, such as roads. This has meant it has become more attractive to other forms of FDI and has improved its overall competitiveness

Draw and explain a demand and supply diagram to show the impact of a rise in Chinese demand for Zambian copper An increase in demand for copper leads to a shift to the right in the demand curve. As a result Zambia is able to sell more copper Q2 at a higher price P2. This will increase the value of its output.

Draw a supply and demand diagram to show the impact of a market surplus. Explain how this will affect the price of copper If price Is above the equilibrium there will be an excess supply. As a result Qs will exceed Qd. Price will have to fall to clear the market.

Draw a supply and demand diagram to show the impact of a market shortage. Explain how this will affect the price of copper. If price Is below the equilibrium there will be an excess demand. As a result Qd will exceed Qs. Price will have to rise to clear the market.

Fig 7 Starter Draw a diagram to show what has happened to the demand for copper over time Draw a diagram to show what has happened to the supply of copper over time What was happening to demand and supply when there was a surplus? What was happening to demand and supply when there was a shortage?

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Define the following: Interdependence How the performance of one economy affects the performance of another Commodity a raw material or primary agricultural product that can be bought and sold, such as copper or coffee Exchange Rate The value of one currency in terms of another Depreciation A fall in the value of a currency, for example.

Explain how a falling price of copper is bad for the Zambian economy (6 marks) A falling price of copper means that the value of Zambia s exports falls. As a result the value of its output is lower and economic growth will fall. This may mean lower living standards in Zambia and a rise in unemployment as some workers in the copper industry may lose their jobs A lower value of output may also mean less tax revenue for the government to spend on education and infrastructure which could further reduce Zambia s growth potential.

Use a diagram to show the impact of a falling price of copper on the value of the Kwacha (6 marks) As the price of copper falls the value of Zambian exports decreases. This leads to a fall in demand for Kwacha and a depreciation of the currency from..to

Explain the economic benefits of a depreciation of the Kwacha (6 marks) A lower value of the Kwacha may mean Zambia s exports are more competitive. This may mean that there is a higher demand for them which will add to their GDP. This will help to counter the fall in demand for exports of copper. These are priced and traded in dollars and so will be unaffected by the falling currency In addition imports will be more expensive so Zambian consumers may buy less foreign goods and services and more Zambian goods and services. This again could add to their economic output.

Explain the possible economic problems caused by a depreciation of the Kwacha (6 marks) A fall in the value of the Kwacha makes imports to Zambia more expensive. As a result import prices will rise, which could lead to inflation rising. (cost push inflation). This could raise firms costs, reducing their competitiveness. Another impact will be to increase prices for consumers reducing their living standards.

Explain the knock on effects to the Zambian economy of its second largest employer making 9300 people redundant (6 marks) One impact will be a downward multiplier effect with less spending in the Zambian economy. This could lead to lower AD, and slower economic growth as a result. Unemployment may then rise further as other firms lay off workers. The government s budget deficit may increase if they have to pay out more in benefits to the 9000 workers and they receive lower tax revenues due to people being unemployed.

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Compare the price of copper with the price of crude oil from 1990 to 2015 From 1990 to 2003 there was little change in the price of copper. If anything it fell slightly. Again for oil there was little change. If anything it rose slightly Between 2003 and 2008 both rose sharply. Copper from 2000 per tonne to about $7000 per tonne. Oil rose from 30 dollars per barrel in 2003 to just short of 100 in 2008. IN 2008 both saw a fall in price as a result of the recession before recovering again. Since 2011 the price of copper has declined gradually The price of oil remained stable up until 2014 where a sharp fall in price was seen

Assess the benefits to the Zambian economy of specialising in the production of copper (8 marks) Zambia has an absolute advantage in the production of copper. Exports to a global market have enabled its economy to grow by increasing its value of output. The copper industry employs many Zambians providing them with an income The copper boom led to Zambia s exports growing markedly to China from 2009 to 2013 Copper has enabled it to benefit from FDI from China with a number of Chinese enterprises owning copper mines. As a result China has invested in Zambian infrastructure which has improved its productive potential. Specialisation has led to Zambia being dependent on Chinese demand for copper. As Chinese demand has slowed this has had serious consequences for the economy Commodity prices are very much dependent on supply and demand which can mean a fall in prices and a big impact on value of output It can be argued that Zambia is overly specialised and therefore vulnerable to economic shocks such as the fall in commodity prices discussed in the evidence

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Define the following Productivity Output per worker per period of time International Competitiveness The ability of a country to compete successfully internationally and maintain improvements in real output and wealth.

Think Why is UK productivity so poor? Why does it matter? What can we do about it?

Explain the likely impact of the data in figure 10 on the UK economy This may make UK firms less competitive internationally as their average costs of producing goods and services may be higher than in other countries If UK firms are less competitive they may export less and we may buy more imports. As a result our trade deficit may increase With less exports our GDP may be lower than it otherwise might have been. This also means lower economic growth If firms are less competitive we may also see job losses in those industries where we struggle to compete. This may increase unemployment UK workers may have lower wages because of lower productivity. This may mean lower living standards and lower levels of Aggregate Demand than if productivty was higher.

Evaluate ways by which the UK government can tackle the UK s productivity problem The government could spend more on education and training. This means workers are more skilled. As a result they may be able to produce more goods and services in a period of time, meaning productivity rises. However this may take a long time to have an impact. In addition more money spent does not always mean the quality of education will increase The government could cut corporation tax. This means firms have more profit after tax to invest in capital such as machinery. With more and better capital more can be produced per worker boosting productivity. However if this capital is labour saving it may mean some job losses which could increase unemployment The government could subsidise firms for capital investment. This could encourage firms to invest in capital. With more and better capital more can be produced per worker boosting productivity. However if this capital is labour saving it may mean some job losses which could increase unemployment The government could invest more in infrastructure. They could spend more on improving transport networks. This could make it easier for employees to move around the country and make it quicker to transport goods. As a result each worker may be able to produce more on average. However this will involve large increases in government spending when the government has been trying to eliminate its large budget deficit.

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Explain the difference between GDP and GDP per capita (4 marks) GDP measures the total value of goods and services produced in a country in a period of time. GDP per capita is per person, or per head. It is calculated by dividing the GDP by the population

To what extent does the data suggest a link between GDP per capita and levels of education (6 marks) The data does suggest a link. In most cases countries with higher levels of education have higher GDP. For example in Switzerland 99.7% of people have completed education of some form and they have a GDP of $83, 000. In Cambodia and Morrocco only 51% and 65% of the population are educated to some level and they have much lower levels of GDP ($2800 and $948) Also, the countries with the highest percentages of people that have completed P,S and T education have higher GDP in general. This suggests tertiary education to be particularly important. However there are some countries that buck the trend. The UK has very high levels of people with tertiary education but has lower GDP than Switzerland, Singapore and Germany Also Malaysia has a high percentage of people that have completed P,S and T education but its GDP per capita is relatively low

Explain two ways by which education can help a country to be more competitive (6 marks) Education can increase productivity. If workers are more productive, firms in a country can produce at a lower Average Cost. This may enable them to cut prices and therefore the country will be more competitive. Higher levels of education can increase the skill levels of employees in a country. This may mean firms are more innovative or can produce better quality products. As a result the demand for a countries exports will rise and it will be more competitive.

Other than education, explain two other factors that can affect how competitive a country is (6 marks) Investment in capital. If a country has high levels of investment its productivity may be higher. This means its firms will be able to produce at a lower Average Cost and they will be more competitive as a result. The exchange rate. A change in the ER can affect competitiveness. If the currency depreciates, exports will be more competitive abroad and domestic products will be more competitive against more expensive imports.

International Competitiveness The ability of a country to compete successfully internationally and maintain improvements in real output and wealth.

Starter How many factors can you think of that influence a countries competitiveness? Which are the most important?

Education is the most important influence on a country s international competitiveness, discuss (8 marks)

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What is FDI? The investment by foreign companies in the production of goods and services in another country How can the UK attract more FDI? Lower corporation tax rates Remain in the EU Reduce minimum wage and bureaucracy Offer incentives such as grants, tax relief etc

How does receiving FDI benefit countries like the UK? Creates jobs in the firm itself and in supporting industries Multiplier Effect Adds to UK GDP Contributes to tax revenue for UK government Helps our balance of payments Skills and technology transfer However.. There may be more competition for existing firms Above effects may be limited Profits may be repatriated Tax avoidance from transfer pricing

How does providing FDI benefit countries like China? May enable access to needed raw materials such as copper, which help it to grow Profits flow back to China helping its balance of payments Allows firms from these countries to circumvent tariff barriers, access new markets, reduce transport costs etc

What impact does receiving FDI have on the exchange rate? (draw a diagram to show this)

Starter - Think What is a MNC? What costs and benefits can MNCs bring to host countries?

Look through each cost and develop. Development could focus on the because (why they happen) Development could focus on the therefore (consequences)

Look through each benefit and develop. Development could focus on the because (why they happen) Development could focus on the therefore (consequences)

Question To what extent do Multinational Companies benefit developing countries (8 marks)