1- International economics

Question 1

Globalisation

Answer 1

increasing itergration of the worlds local, regional and national economies into a single international market

Question 2

Factors influencing globalisation

Answer 2

-transport and infrastructure
-tech
-trade liberalisation
-international financial markets
-TNCs

Question 3

impacts of globalisation on consumers

Answer 3

-^choice
-fall in price
-possible ^ in price due to rising incomes
-loss of culture

Question 4

impacts of globalisation on workers

Answer 4

-^migration
-lower wages
-^wages for high skill jobs
-^inequality

Question 5

impacts of globalisation on producers

Answer 5

-reduced risk
-exploit comparative advantage
-firms who can’t compete internationally lose out

Question 6

comparative advantage

Answer 6

produce a good more cheaply relative to other goods

Question 7

absolute advantage

Answer 7

produce a good more cheaply in absolute terms than another country

Question 8

pros of specialisation

Answer 8

-^world output
-^economies of scale
-^choice
-^competition

Question 9

cons of specialisation

Answer 9

-over dependence
-structural unemployment
-environment suffers
-loss of culture

Question 10

factors of patterns of trade

Answer 10

-comparative advantage
-emerging economies
-trading blocs
-relative exchange rates

Question 11

terms of trade

Answer 11

the rate of exchange of one product for another when two countries trade

Question 12

what increases terms of trade

Answer 12

increase price of exports
fallin price of imports

Question 13

what is the terms of trade calculation

Answer 13

average export price index/average import price index x 100

Question 14

short run influences on terms of trade

Answer 14

-exchange rates
-inflation
-changes in demand and supply for imports and or exports

Question 15

long run influences of terms of trade

Answer 15

-productivity
-changing incomes

Question 16

impacts of changes of terms of trade

Answer 16

-increased terms of trade improves the balance of payments
-may however lead to a fall in GDP
-There will be less demand for exports

Question 17

Trading blocs

Answer 17

-preferential trading area
-free trade area
-customs union
-common market
-economic & monetary union

Question 18

preferential trading area

Answer 18

reduced tariffs and quotas on certain goods

Question 19

free trade area

Answer 19

free trade amongst members, but separate trade conditions to each other on external nations

Question 20

customs union

Answer 20

free trade area with common external barriers on external nations

Question 21

common market

Answer 21

a customs union with further integration and free movement of labour and capital

Question 22

economic & monetary union

Answer 22

common market with same currency and central bank

Question 23

benefits of free trade

Answer 23

-lower prices due to comp and tech
-encourages specialisation
-economies of scale
-large customer market and more choice
-firms inside are more protected
-more comp inside
-more jobs
-growth

Question 24

cons of free trade areas

Answer 24

distords world trade
leads to inefficient firms
retaliation
davours devolped coutries in the bloc

Question 25

aims of the WTO

Answer 25

to bring out trade liberalisation and to ensure countries act according to the trade agreements

Question 26

what power do the WTO have

Answer 26

if a country fails to follow its trade agreements, a country or group can file a complaint

Question 27

conflicts of the WTO

Answer 27

they could be considered too powerful they sometimes ignore developing countries

Question 28

types of protectionism

Answer 28

-subsidising domestic production -tariffs -quotas -embargos

Question 29

Reasons for protectionism

Answer 29

-to protect jobs -raise gov revenue -protection from unfair competition -Danger of over specialisation -improce CA deficit

Question 30

impacts if protectionism

Answer 30

-higher prices -less choice -domestic producers see higher demand -producers see higher costs for resources they import

Question 31

Three parts of the balance of payments

Answer 31

-current account -financial account -capital account

Question 32

what is the current account

Answer 32

trade in goods trade in services income and transfers

Question 33

what is in the financial account

Answer 33

fdi portfolio investments other investments

Question 34

causes of a current account deficit (short term)

Answer 34

-increased demand which domestic supply can't keep up with -strong exchange rate -high level of relative inflation

Question 35

cause of a current account deficit (mid term)

Answer 35

loss of comparative advantage

Question 36

causes of a current account deficit (long term)

Answer 36

-lack of capital investment -deindustrialisation -lack of competitiveness -corruption

Question 37

ways to reduce imbalance of the BofP

Answer 37

-usage of monetary and fiscal policies to reduce inflation -supply side (boost productivity and improve quality)(LT) -expenditure switching (control of inflation, devalue of the pound)

Question 38

what are exchange rates

Answer 38

purchasing power of one currency in terms of what it can buy of other currencies

Question 39

what is a free floating exchange rate

Answer 39

value of currency is determined purely by market demand and supply of the currency

Question 40

what is a managed floating exchange rate

Answer 40

value is determined by demand and supply but the central bank will try to prevent large changes

Question 41

what is a fixed exchange rate

Answer 41

government set their currency against another and that exchange rate does not change

Question 42

factors affecting a floating exchange rate

Answer 42

-changes in demand and or supply -exports and imports -investment -speculation

Question 43

how can governments intervene to manipulate the exchange rates

Answer 43

-interest rates -gold+foreign currency reserves

Question 44

how does raising interest rates increase the value of the pound

Answer 44

people will convert to pounds to put in UK banks therefore demand for the pound raises

Question 45

why do countries devaluate their currencies

Answer 45

boost competitiveness

Question 46

how does a weaker currency boost competitive

Answer 46

weaker £ encourages exports, strengthens balance of payments assuming Marshall-lerner condition

Question 47

what is an evaluative point of weakening a currency to increase competitiveness

Answer 47

it is inflationary other countries could follow

Question 48

impacts of changing exchange rates

Answer 48

-current account surplus or deficit -economic growth -falls in exchange rate increases inflation as imports become expensive

Question 49

what are the measures of international competitiveness

Answer 49

relative labour costs relative export prices

Question 50

factors influencing competitiveness

Answer 50

-exchange rates -productivity -regulation -investment -taxation -inflation -economic stability

Question 51

pros of competitiveness

Answer 51

-current account surplus -FDI -^employment -economic growth

Question 52

cons of competitiveness

Answer 52

-easy to lose -a current account surplus could lead to a rise in exchange rate which decreases competitiveness -become more dependent

Question 53

how to reduce a current amount deficit

Answer 53

-expenditure reducing (conractionary fiscal/monetary) -expenditure switching (protectionism) -expenditure switching (weakening of the exchange rate) -supply side policies to boost international competitiveness

Question 54

cons of a current account deficit

Answer 54

-lowers AD -Debt burdens -weakening of the exchange rate