4.1.1 Globalisation Quiz: Pearson Edexcel Economics A, Unit 4

The 20 questions

1. Which of the following best defines globalisation?

   • A long-run fall in the general price level across the world economy as productivity rises in every country
   • Growing integration of national economies through increased cross-border flows of goods, services, capital, labour and technology
   • The transfer of economic decision-making from national governments to a single supranational authority
   • A policy in which governments close their borders to foreign trade to protect domestic industries from competition

2. Which factor has most directly lowered the cost of moving physical goods between countries over the last 50 years?

   • The introduction of fixed exchange rates across all major economies after the collapse of Bretton Woods
   • A sustained rise in tariffs agreed in successive multilateral trade rounds to protect domestic manufacturers
   • Containerisation of shipping, which cut loading, handling and transit costs for long-distance trade
   • Increased government ownership of international shipping lines in most high-income economies

3. Which development is a factor contributing to globalisation in the last 50 years?

   • A return to self-sufficient national economies in which governments restrict foreign investment and trade
   • Falling communication costs, including the internet, allowing firms to coordinate production and sales across several countries
   • A decline in the number of multinational companies operating across borders as firms focus on domestic markets
   • A universal return to the gold standard, which fixes every country's currency to a set quantity of gold

4. What is a multinational company?

   • A firm that sells its output only through international online marketplaces and holds no physical assets
   • A firm that owns or controls production or sales facilities in more than one country
   • A state-owned enterprise that receives government subsidies for exporting goods to foreign markets
   • A firm that trades only with other firms located in its home country and never exports

5. Which is an effect of globalisation on consumers in a developed economy?

   • Access to a wider range of imported goods, often at lower prices than comparable domestic goods
   • Fewer product choices because domestic producers dominate almost every market in the economy
   • A guaranteed fall in the real value of household incomes in every year that trade expands
   • Higher prices for all goods because import competition is removed from domestic markets

6. Which impact on workers in a high-income country is most consistent with globalisation?

   • Trade unions become unnecessary because imported goods can never compete with domestic output in any sector
   • Employment rises in every sector because imports reduce the demand for labour in the domestic economy
   • Real wages in every sector are guaranteed to rise because all foreign competition is banned by law
   • Some manufacturing jobs are lost as firms relocate production to lower-cost countries, while service-sector jobs may grow

7. A multinational builds a factory in a developing country to exploit lower labour costs. Which is a likely benefit for the host government?

   • Higher tax revenue, new employment and possible technology transfer from the investment
   • A fall in its foreign direct investment inflows as firms avoid countries that host factories
   • Higher unemployment as the foreign investment displaces every local firm in the same industry
   • A certain loss of all domestic tax revenue because foreign firms are exempt from paying tax

8. Which is a potential environmental impact of globalisation?

   • Rising carbon emissions from long-distance transport of traded goods and from energy used in global supply chains
   • A reduction in emissions because all production is concentrated in one country with strict controls
   • The elimination of pollution because multinational firms must follow one universal set of environmental laws
   • Lower energy demand because international trade replaces all domestic production in every industry

9. After a country cuts its tariffs on imported clothing, imports rise and some domestic clothing producers lose market share. Which best describes the effect?

   • Imports fall to zero because domestic firms are able to produce all clothing more cheaply than foreign firms
   • Domestic producers gain market share because lower tariffs raise their production costs and prices
   • Consumers lose because lower tariffs always cause the price of clothing to rise sharply in the short run
   • Greater competition from imports, with gains for consumers and losses for some domestic producers

10. Which statement best evaluates whether globalisation has reduced global inequality?

    • Globalisation has no effect on inequality because trade is a zero-sum activity in which one side always gains
    • Inequality within every country has fallen because wages have equalised across all occupations and regions
    • Inequality between countries may have narrowed as some emerging economies grew fast, but inequality within many countries has risen
    • Global inequality has risen in every country since 1970 without any exception across income groups

11. How can globalisation constrain a government's economic policy?

    • It prevents governments from using fiscal policy at any stage of the business cycle, including recessions
    • Mobile capital can move abroad if taxes or regulation are seen as unattractive, limiting a government's freedom to set tax rates
    • It requires governments to abolish all public spending on health and education in order to remain competitive
    • It forces every government to fix its tax rates at the same level so that no country can compete with another

12. Which of the following best describes the globalisation of labour?

    • Governments banning all cross-border movement of workers in order to protect national employment levels
    • Workers migrating across borders for employment, and firms recruiting staff from many countries
    • Workers in every country earning the same wage rate for the same job as a result of trade liberalisation
    • Firms hiring only domestic workers to protect national identity and reduce the risk of skills shortages

13. A global firm sources components from three countries, assembles them in a fourth and sells the product worldwide. Which concept best describes this?

    • Global supply chains, in which production is fragmented across several countries
    • Autarky, in which a country produces all goods domestically and does not trade with other countries
    • Protectionism, in which quotas are placed on all imported components to protect domestic suppliers
    • Monopoly control of a single domestic market in which the firm faces no competition at all

14. Which best describes the 'race to the bottom' concern linked to global companies?

    • Firms competing for workers by raising wages and improving conditions to attract the most skilled staff
    • All countries raising tariffs at the same time in order to protect their domestic employment levels
    • Governments agreeing to adopt a single global currency so that exchange rate competition is eliminated
    • Countries lowering labour, environmental or tax standards to attract mobile investment from global firms

15. A rise in the number of global companies could most directly make which problem harder for national governments?

    • Keeping inflation low, because global firms hold prices constant regardless of demand in any country
    • Managing the exchange rate, since multinationals are required to hold only the local currency in their accounts
    • Collecting income tax from households, since multinationals always pay all personal tax on behalf of workers
    • Taxing profits that are shifted across borders through internal transfer pricing between subsidiaries

16. How can foreign direct investment raise productivity in a host economy?

    • Technology, management methods and skills are transferred to local workers and to domestic suppliers
    • Consumers are forced to pay higher prices for all imported inputs, which lowers domestic output by law
    • Foreign firms reduce investment in training and skills to keep their own costs as low as possible
    • Local firms are protected from all competition by law, so they have no incentive to improve efficiency

17. Which of these is an economic, rather than political or cultural, dimension of globalisation?

    • Integration of financial markets through rising cross-border flows of capital and investment
    • The creation of a single world government with authority over national elections and taxes
    • The spread of a single language to be used for all diplomatic communication between governments
    • The adoption of identical national anthems and public holidays in every country of the world

18. Which best describes the shift of manufacturing production that accelerated from the 1980s onward?

    • Manufacturing output falling to zero in advanced economies because all demand is now met by imported services
    • Manufacturing becoming concentrated only in high-income countries, with no production left in emerging economies
    • Governments nationalising all large manufacturing firms so that output is controlled by the state in every country
    • Production moving to emerging economies with lower labour costs, while high-income economies specialise more in services

19. A global company moves a production line from a high-wage country to a low-wage country. Which combination of effects is most likely?

    • Lower output in both countries, because global firms always reduce production when they relocate
    • Lower production costs and higher profit for the firm, with job losses and wage pressure in the home economy
    • No change in costs or employment, because capital and labour are perfectly immobile across national borders
    • Higher costs and lower profit for the firm, with rising employment and wages in both countries

20. Which evidence would most strengthen the claim that globalisation has raised living standards in developing economies?

    • Higher unemployment in the export sector alone, with no change in income for the rest of the population
    • A rise in the number of tariffs imposed by those countries on imports from the rest of the world
    • Sustained rises in real GDP per capita and falling poverty rates in countries that opened to trade and investment
    • Stagnant exports and falling foreign direct investment inflows to the same countries over a decade

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