Economic Impacts of Globalisation

Which of the following represents the idea of a "global economy"?

• policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors

• Includes all economic activities which are conducted both within and between nations, including production, consumption, economic management, work in general, exchange of financial values and trade of goods and services.

• an economic system based on the private ownership of the means of production and their operation for profit..

Answer explanation

X Protectionism: policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors

X Capitalism: an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private property, property rights recognition, voluntary exchange, and wage labor.

Which of the following define(s) a Multinational Corporation (MNC) / Transnational Corporation (TNC)?

• any corporation that has production lines in less developed countries to lower costs of production

• any corporation that is registered and operates in more than one country at a time.

• businesses that maintain revenues, assets or a number of employees below a certain threshold.

Answer explanation

X businesses that maintain revenues, assets or a number of employees below a certain threshold -> This is known as a small-medium business (SMEs)

Which of these is NOT an impact of a Free Trade Agreement (FTA)?

• Improve price competitiveness for local businesses

• Lower costs due to simplified trade procedures

• Exploitation of low wage workers

Answer explanation

FTA does not directly lead to the exploitation of low wage workers. The FTA encourages trade to take place at a faster rate between countries so that both countries can import goods at a lower costs from other countries and at the same time, they can export their goods to a larger market.

Which of these is not a POSITIVE economic impact of globalisation on COUNTRIES?

• FDI allows for countries to gain financing and technology from other countries

• FTA increases overall trade and hence economic growth for the country

• Countries becoming increasing interconnected and interdependent, hence becoming more susceptible to external developments.

Answer explanation

This is the answer as globalisation increases the interconnectedness and interdependence of countries, it also increases the vulnerability of any ONE event to affect the global economy as a whole. For e.g. the 2007 to 2008 Global Financial Crisis which affected not just the US but investors in Singapore as well.

Companies can benefit from globalization because...

• It allows them to increase market share

• It will increase competitiveness within the industry

• It allows them to hire talents from all around the world

• It allows them to lower costs of production

Answer explanation

Increasing competitiveness within the industry is not necessarily a benefit for companies as they may lose out if they fail to compete with each other.

However, increased competition can be a benefit for consumers as it can lead to companies competing to produce better goods at lower prices.

Which of these is NOT a challenge that Small Medium Enterprises (SMEs) face as a result of globalisation?

• Lack of support from Singapore government

• Increased competition from MNCs and foreign businesses

• Lack of manpower

Answer explanation

The Singapore government recognises the importances of supporting SMEs and they provide multiple grants and support to SMEs. For e.g. Productivity Solutions Grant is given to SMEs to improve on their productivity. Also in the 2022 Budget, $600 million is set aside for this as well.

Lack of manpower is a challenge as MNCs also compete to attract talents and locals to work for them instead of SMEs.

What should small local companies do to avoid losing out to MNCs?

• Set cheaper prices

• Continually innovate its products

• Sell fewer items

Answer explanation

Price is often not the main reason why SMEs lose out to MNCs. Besides if SMEs lower its price, it might not increase sales if the product itself is not attractive.

Selling fewer items will definitely not help in the overall sales.

Due to globalisation, there is increased .... [can be 1 or 2 words] for individuals and hence, improving their standard of living and benefitting them.

Due to globalisation, there is ..... [more than 1 word] for individuals, hence lowering their standard of living and would not benefit them.

Which of the following is NOT how individuals can respond to these negative economic impacts arising from globalisation?

• By taking up courses online

• By using the GST vouchers given by government

• By using Skillsfuture to pursue their hobbies

• By using their Workfare Training Support Scheme

Answer explanation

Pursuing hobbies and upskilling is how one should stay relevant and competitive in the job market. Pursuing one's hobbies may lead to the discovery of one's strengths and hence will help employment opportunities.

GST Vouchers are mainly there to help Singaporeans cope with rising costs of living, not targeted at the economic impact of globalisation.