Circular flow of income
What is the name of the five (5) sectors in the circular flow model?
Household, Business, Financial, Government, Overseas
The voluntary exchange of goods or services between different actors such as consumers, companies, and nations.
Define a TNC.
A TNC is a business that produces and sells its product in a number of countries throughout the world.
Define globalisation.
The increasing interconnectedness of people, businesses, countries and economies through trade, communication, technology and transport.
Define surplus.
When a country produces more of a good than it needs or can be used domestically. The surplus can then be sold to other countries as exports.
What are flows into and exiting the economy called?
Injections and leakages
Identify one main reason why countries trade.
- Access cheaper goods and services from overseas
- Access better quality or innovative products
- Access health and education services
- Sell excess products
- Formalise trade agreements with other countries
Identify a feature of a TNC.
•They have their head quarters in one country and they establish subsidiaries in other countries.
•Large companies that operate in many different countries.
•Less centralised management and operational structure as they manage their branches from the country they operate in
•Conduct a large percentage of business outside of their home country.
•Represent the highest level of involvement in global business
•National borders do not represent barriers to trade
- International trade
- Transnational companies
- Interconnected supply chains
- Outsourcing and offshoring
- Global transport and communication
- Movement of people, goods, services, capital and ideas
Define import.
A good or service that is produced overseas and then brought into Australia.
What flows into and from the financial sector?
Savings and investment
Identify one benefit of selling exports.
- Brings money into the Australian economy
- Helps local businesses to grow
- Employment increases
Identify a feature of a TNC.
•They have their head quarters in one country and they establish subsidiaries in other countries.
•Large companies that operate in many different countries.
•Less centralized management and operational structure as they manage their branches from the country they operate in
•Conduct a large percentage of business outside of their home country.
•Represent the highest level of involvement in global business
•National borders do not represent barriers to trade
What is an advantage of globalisation?
- larger market for goods and services
- cheaper consumer prices
- outsourcing can benefit domestic firms and foreign labor
- increased standard of living
Define global supply chain.
The sequence of processes involved in the manufacturing and distribution of a product from producer to consumer.
What flows into and from the government sector?
What countries are Australia's top 2 trading partners?
China & Japan
What is an advantage of a TNC?
- Decrease the level of poverty in countries by creating jobs in developing countries
- Access to cheaper goods
- Increases employment and standard of living
- Bring money into the economy, therefore growth
- Contribute towards the creation of new transport links which can benefit the local community
What is a disadvantage of globalisation?
- Concentrates wealth in richer countries
- Some poorer countries can be left behind
- Labour and resources can be exploited in poorer countries
- Regions and culture can lose their uniqueness as products available around the world can become homogeneous
Describe specialisation.
Specialisation occurs when a country strategically focuses its resources on the production of specific goods or services that it can produce more efficiently and competitively than others.
What are the top two flows between the household and business sector?
Economic resources and income.
Identify one negative effect of imports.
- Australian jobs may be lost to countries with cheaper labour.
- Imports can lower employment opportunities for Australian workers.
- Businesses find it difficult to compete with overseas countries.
- Money leaves the Australian economy, affecting the exchange rate.
- Harmful animal species and diseases can be brought into the country.
What is a disadvantage of a TNC?
- TNC's set up production in countries that have high levels of poverty
- Quality issues
- They employee children and pay workers the minimum wage
- Profits are returned to the home country rather than the host country
- Many TNC's have a poor record in environmental matters
Identify a business that has benefited from globalisation. Explain why.
Teacher discretion.
Define export.
A good or service that is produced in Australia and sold overseas.