Econs Macro Case Study

Question 1

Globalisation (Benefits of Trade flow- Exports)

Answer 1

1. Economic growth, lower unemployment
2. Greater efficiency and lower prices
3. Improve BOP position and foreign reserves

Question 2

Globalisation (Costs of Trade flow - Exports)

Answer 2

1. Vulnerability to external supply shocks
2. Structural Unemployment

Question 3

Globalisation (Benefits of Trade flow- Imports)

Answer 3

1. Price stability and growth in potential capacity
2. Greater choice

Question 4

Globalisation (Costs of Trade flow- Imports)

Answer 4

1. Effects on Growth, BOP and Exchange rate
2. Competition between Domestic Firms and Foreign firms

Question 5

Globalisation (Benefits of Labour flow)

Answer 5

1. Increase the size and quality of the labour force

Question 6

Globalisation (Costs of Labour flow)

Answer 6

1. Worsening income inequality
2. Rise in domestic unemployment
3. Brain drain

Question 7

Globalisation (Short-term capital flow- hot money)

Answer 7

Hot money inflow-> currency appreciation -> price competitiveness of exports fall -> AD falls

Hot money outflow-> Currency depreciation -> imported resources more expensive -> SRAS falls

Question 8

Globalisation (Benefits of long-term capital flow: FDI)

Answer 8

1. Greater economic growth and lower unemployment
2. Increase in level of technology and productivity
3. Improvement in government budget position

Question 9

Globalisation (Costs of long-term capital flow: FDI)

Answer 9

1. Footloose nature of MNCs resulting in unemployment
2. Crowding-out effect
3. Environmental Impact