2.2 The global economy
- Syllabus
- 2026
- Section
- 2.2
- Level
- —
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In this section
Topic 2.2.1
2.2.1 Globalisation
Objectives in this topic
2.2.1.a Globalisation: increased integration and interdependence
Definition of globalisation: increased integration and interdependence of economies.
2.2.1.b Reasons for globalisation
Reasons for globalisation:
- fewer tariffs and quotas
- reduced cost of transport
- reduced cost of communication
- increased significance of multinational corporations (MNCs).
2.2.1.c Impacts of globalisation on stakeholders and the environment
Impacts of globalisation and global companies on individual countries, governments, producers and consumers, workers and the environment:
- rising living standards
- greater choice
- lower prices
- reduced costs of communication
- closing of traditional industries
- environmental impact.
2.2.1.d Multinational corporations (MNCs)
Definition of multinational corporations (MNCs):
- definition of foreign direct investment (FDI)
- reasons for emergence of MNCs/FDI:
- to benefit from economies of scale
- to access natural resources/cheap materials
- lower transport and communication costs
- to access customers in different regions.
- advantages and disadvantages of MNCs/ FDI:
- creating jobs
- investing in infrastructure
- developing skills
- developing capital
- contributing to taxes
- avoiding paying taxes
- environmental damage
- moving profits abroad.
Topic 2.2.2
2.2.2 International trade
Objectives in this topic
2.2.2.a Advantages and disadvantages of free trade
Advantages and disadvantages of free trade, including:
- lower prices and increased choice for consumers
- lower input costs
- wider markets for businesses
- foreign competition harming domestic businesses
- increasing unemployment.
2.2.2.b Reasons for protection
Reasons for protection:
- prevent dumping
- protect employment
- protecting infant industries
- to gain tariff revenue
- protect consumers from unsafe products
- reducing current account deficits
- retaliation.
2.2.2.c Methods of protection
Methods of protection:
- tariffs
- quotas
- subsidies
- advantages and disadvantages of each method of protection
- supply and demand diagrams to show tariffs, quotas and subsidies.
2.2.2.d Modern trading blocs
Modern trading blocs:
- impact of trading blocs on member and non-member countries
- examples of trading blocs.
2.2.2.e Role of the World Trade Organization (WTO)
Role of the World Trade Organization (WTO):
- actions by the WTO.
2.2.2.f Trade patterns of developed and developing countries
Trade patterns of developed and developing countries.
Topic 2.2.3
2.2.3 Exchange rates
Objectives in this topic
2.2.3.a Exchange rates
Definition of exchange rates.
2.2.3.b Factors affecting supply and demand of currencies
Factors affecting supply and demand of currencies:
- interest rates
- currency speculators
- imports and exports of goods and services
- supply and demand diagrams to show determination of exchange rates.
2.2.3.c Appreciation
Definition of appreciation:
- definition of revaluation
- impact of appreciation of exchange rate on:
- import and export prices
- demand for imports and exports
- current account on balance of payments.
2.2.3.d Depreciation
Definition of depreciation:
- definition of devaluation
- impact of depreciation of exchange rate on:
- import and export prices
- demand for imports and exports
- current account on balance of payments.