Suggested Answers of BT2 Revision Package - ASKnLearn

Increase Real output for Asiaproducing intermediate output,Increase Real output for Chinaproducing final goods assembly.Evaluation: Beggar thy neighboreffect à many countries can gain• Increased mobility ofcapital ( gross fixed capitale.g. machinery, rawmaterials )• Evidence: Extract 7: one ofthe factors that determinelonger productivity growth isopenness of an economy toFDI• Use AD-AS framework toanalyse.• Globalization – negativeimplications on governmentbudget positionEvidence: “biggest fiscalstimulus” – in the context ofextract 2 – the example of therecent financial crisis required alarger magnitude of increased inG expenditure in order toincrease AD of the economy.• Increased mobility of laborand other factors ofproductions acrosscountries-­‐ FOP can now be easilyovercome with inflow oflabour and capitalresourceWhilst globalization increases theinternational factor mobilityacross economies - it aggregatesthe negative impact of factorimmobility within the domesticeconomy. The inflow of betterquality labour and capital mayrender some skills redundant andhence local workers becomeunemployed – the mismatch ofskills unresolved will lead tostructural unemployment withinthe country.à Ext 7 “rural to urban areas”movement of workers is notcurrently taking place in China àcould be due to available inflowof foreign labour à hence slowsdown need to tap on the Chineselabour force à thus slowing downthe job opportunities available toChinese households in the ruralareas à reduces their ability toearn wages and hence increasepurchasing power and materialwelfare.