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The real numbered content list from the official Pearson specification, each point matched to the lesson that covers it. Click through to a lesson from its spec point below, or rate how confident you feel — saved in this browser so it’s there next time you come back. Any point with no matching lesson is flagged, not hidden.
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4.3.1 — Causes and effects of globalisation
- 4.3.1.1
Characteristics of globalisation
- a) Increase in trade as a proportion of GDP.
- b) Increase in importance of transnational companies (TNCs) and foreign direct investment (FDI).
- c) Increase in migration.
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- 4.3.1.2
Causes of globalisation
- a) Factors contributing to increased globalisation in the last 50 years: trade liberalisation; increased number and size of trading blocs; political change (breakdown of the Soviet system and opening up of China); reduced cost of transport and communications; increased significance of TNCs.
- b) FDI by TNCs: reasons for FDI; the impact of FDI on recipient countries.
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- 4.3.1.3
Effects of globalisation
- a) Possible benefits of globalisation: increased economic growth; increased tax revenue; economies of scale; lower prices and higher consumer surplus; more choice; higher living standards.
- b) Possible costs of globalisation: displaced workers; exploitation of workers; environmental impact of increased trade; loss of tax revenue from transfer pricing; increased income inequality within countries; the influence of TNCs on domestic economic policy.
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4.3.2 — Trade and the global economy
- 4.3.2.1
Specialisation and comparative advantage
- a) Benefits and costs of specialisation and trade in the international context.
- b) The theory of comparative advantage: the distinction between absolute and comparative advantage; assumptions underlying the theory of comparative advantage; limitations of the theory of comparative advantage.
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- 4.3.2.2
Patterns and volume of world trade
- a) Factors influencing patterns of trade between countries and causes of changes in these patterns: impact of emerging economies; changes in comparative advantage; growth in trading blocs and bilateral trading agreements; changes in relative exchange rates; changes in protectionism between countries.
- b) Changes in trade flows between countries, and the reasons for these changes.
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- 4.3.2.3
Terms of trade
- a) Understanding and calculation of the terms of trade.
- b) Factors influencing a country's terms of trade, changes in: relative inflation rates; relative productivity rates; relative labour costs; the exchange rate; the prices of imports and exports.
- c) The impact of changes in a country's terms of trade on: export revenues; living standards; balance of trade.
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- 4.3.2.4
Trade liberalisation and trading blocs
- a) The role of the World Trade Organization (WTO) in trade liberalisation.
- b) Types of trading blocs: free-trade areas; customs unions; common markets; economic and monetary unions.
- c) Costs and benefits of membership of a trading bloc: trade creation; trade diversion; costs and prices; economies of scale; transaction costs; movement of factors of production.
- d) Possible conflicts between trading blocs and the WTO.
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- 4.3.2.5
Restrictions on free trade
- a) Reasons for restrictions on free trade: to protect infant and geriatric industries; to protect domestic industries and employment; to protect national security; to prevent dumping; to correct a deficit on the current account of the balance of payments; to raise revenue.
- b) Types of restrictions on free trade: tariffs; quotas; non-tariff barriers; subsidies to domestic producers.
- c) Impact of protectionist policies on: consumers; producers; governments; living standards; equality.
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4.3.3 — Balance of payments, exchange rates and international competitiveness
- 4.3.3.1
Balance of payments
- a) Components of the balance of payments: the current account; the capital and financial accounts.
- b) Causes of deficits and surpluses on the current account.
- c) Measures to reduce a country's imbalance on the current account.
- d) The significance of global trade imbalances.
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- 4.3.3.2
Exchange rates
- a) The distinction between fixed, managed and floating exchange rates.
- b) Government intervention in currency markets through: foreign currency transactions; the use of interest rates; quantitative easing.
- c) Factors influencing floating exchange rates: relative interest rates; relative inflation rates (purchasing power parity theory); current account of the balance of payments; strength of the economy; capital flight; expectations and speculation; global factors, e.g. falls in commodity prices.
- d) The distinction between revaluation and appreciation of a currency.
- e) The distinction between devaluation and depreciation of a currency.
- f) The impact of changes in exchange rates on: the current account of the balance of payments (with reference to Marshall-Lerner condition and to the J-curve effect); the capital and financial accounts of the balance of payments; economic growth; employment and unemployment; rate of inflation; FDI flows.
- g) Competitive depreciations/devaluations and their consequences.
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- 4.3.3.3
International competitiveness
- a) Measures of international competitiveness: relative productivity rates; relative unit labour costs; relative export prices.
- b) Factors influencing international competitiveness: productivity; quality of human capital; exchange rate; wage and non-wage costs; regulations; quality of infrastructure; non-price factors.
- c) Measures to increase international competitiveness: policies to improve education and training; investment incentives; privatisation and deregulation; measures to reduce the exchange rate of the currency; trade liberalisation.
- d) The significance of international competitiveness: advantages for an economy of being internationally competitive; problems for an economy of being internationally uncompetitive.
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4.3.4 — Poverty and inequality
- 4.3.4.1
Poverty
- a) The distinction between absolute and relative poverty.
- b) Measures of absolute and relative poverty.
- c) Causes of changes in absolute and relative poverty: economic growth; education and training; welfare benefits; changes in tax structure; structural changes in the economy; aid; civil wars and conflict.
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- 4.3.4.2
Inequality
- a) The distinction between wealth inequality and income inequality.
- b) Measurements of inequality: the Lorenz curve; the Gini coefficient.
- c) Causes of inequality in income and wealth within countries and between countries.
- d) The impact of inequality on: enterprise; incentives; savings; education; migration; life expectancy.
- e) The impact of economic change and development on inequality.
- f) The significance of the free market economy (capitalism) for inequality.
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4.3.5 — The role of the state in the macroeconomy
- 4.3.5.1
Public expenditure
- a) The distinction between capital expenditure, current expenditure and transfer payments.
- b) Reasons for the changing size and pattern of public expenditure in an international context: changing incomes; changing age distributions; changing expectations.
- c) The significance of differing levels of public expenditure as a proportion of GDP on: productivity and growth; crowding out; levels of taxation.
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- 4.3.5.2
Taxation
- a) The distinction between, and examples of, direct and indirect taxes.
- b) The distinction between progressive, proportional and regressive taxes.
- c) The economic effects of changes in direct and indirect tax rates on: incentives to work; tax revenues: Laffer curve analysis; income distribution; real output and employment; the price level; the trade balance; FDI flows.
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- 4.3.5.3
Public sector borrowing and public sector debt
- a) The distinction between: fiscal deficits and fiscal surpluses; automatic stabilisers and discretionary fiscal policy; a fiscal deficit and the national debt; structural and cyclical fiscal deficits.
- b) Factors influencing the size of fiscal deficits and national debts.
- c) The significance of the size of fiscal deficits and national debts: impact on interest rates; debt servicing; intergenerational equity.
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- 4.3.5.4
Macroeconomic policies
- a) How governments use fiscal policy, monetary policy, exchange-rate policy, supply-side policies and direct controls to: reduce fiscal deficits and national debts; control the rate of inflation; respond to external shocks in the global economy; reduce poverty and inequality.
- b) Use of demand-side policies in response to the global financial crisis of 2008.
- c) Measures to control TNCs: to reduce tax avoidance; the regulation of transfer pricing; limits to government ability to control TNCs.
- d) The impact of policy changes on: local economies; national economies; the global economy.
- e) Problems facing policymakers when applying policies: inaccurate information; risks and uncertainties; inability to control external shocks.
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4.3.6 — Growth and development in developing, emerging and developed economies
- 4.3.6.1
Measures of economic development
- a) The three components of the Human Development Index (HDI): education, health, income; how they are measured.
- b) Advantages and limitations of the HDI in comparing living standards between countries and over time.
- c) Other measures of development: the percentage of adult male labour in agriculture; access to clean water; energy consumption per capita; access to internet per thousand of population; access to mobile phones per thousand of population; access to doctors per thousand of population.
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- 4.3.6.2
Constraints on growth and development
- a) The impact of economic factors in different countries: volatility of commodity prices; primary product dependency (the Prebisch-Singer hypothesis); savings gap (the Harrod-Domar model); foreign currency gap; capital flight; demographic factors (size and age distribution of population; migration); debt (household and overseas); access to credit and banking; infrastructure; education and skills.
- b) The impact of non-economic factors in different countries: corruption; poor governance; civil wars; migration; terrorism.
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- 4.3.6.3
Measures to promote growth and development
- a) The impact of market-orientated strategies: trade liberalisation; promotion of FDI; removal of government subsidies; privatisation; floating exchange rate systems; microfinance schemes.
- b) The impact of interventionist strategies: development of human capital; protectionism; managed exchange rates; infrastructure development; promoting joint ventures with TNCs; buffer stock schemes.
- c) The impact of other strategies: industrialisation (the Lewis structural dual-sector model); development of tourism; development of primary industries; debt relief; aid.
- d) The role of international institutions: the World Bank; the International Monetary Fund (IMF); non-government organisations (NGOs).
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