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Answer the following 3 questions (each approximately 500 words):
- What is globalisation and how does it affect domestic businesses? In your discussion, include both positive and negative impacts of globalisation. (6 marks)
- When you compare Absolute Advantage Theory and Comparative Advantage Theory, which one appears to be more practical, and why? Also, explain how benefit from trade arises based on this theory using a numerical example of 2 countries producing 2 products. (6 marks)
- Donald Trump, president of United States of America, announced the imposition of tariff on Chinese imports in the recent past. Based on your understanding of the first 3 topics of this unit, (i) what could have been the reason/logic behind such a comment/decision, and (ii) what are the implications of such an intervention on domestic consumers? (8 marks)
You are expected to use at least 5 academic sources (excluding the textbook) to support your viewpoints.
Please place the word count for this assignment on the cover sheet. 10% more or less than 1500 words is acceptable. The marker may, at their discretion, discontinue marking if you go above 10% of the recommended word limit.
International business is the trade and investments that are done across the international borders and business transaction performed with one or more countries. Over the years, the economy of each nation has stopped being self-sustaining, and the trend has been tipping towards a global economy where from a macro point of view, globalization, free trade zones are becoming equally important as regionalization of each product and service in a single nation. The discussion in the next few pages shall show the impact of globalization on the economy of a country and free trade and its impacts on the import and export of the domestic country (Cavusgil et al. 2015).
What is Globalization?
International trade is a mutually conducive arrangement between the nations where they share what they produce enough in lieu of products that they lack in. This form of trade improves the economy mainly due to comparative advantages, economies of scale and, at times, even lower price.
Globalization of production and globalization of trade complement each other since they cannot work without each other. Silk Route testifies that international trade has been there for centuries, but it has developed on a larger scale over the last 600 years. Globalization helps in having a seamless trading relation across international boundaries and the resultant opening up of the global economy. Countries that had a closed-door to FDI and trade have now opened up their doors to foreign investment and trade and are going global as a part of globalization (Hirst, Thompson & Bromley 2009).
Impact of Globalization on Domestic Economy
Globalization is based on the theory of comparative advantage, according to which the country which has enough production of a particular good can export that product to the country that is not efficient enough to produce the same quality or quantity. The assumption that goes along with this principle is that all countries are not proficient at producing all kinds of goods and products, and thus, this is a win-win situation for all the countries while trading with each other. Globalization also conforms to certain rules and regulations of the WTO or World Trade Organization while performing trade between countries (Mminele & Dombret 2017).
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