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Theme 4 > 1- International economics > Flashcards

1- International economics Flashcards

1
Q

Globalisation

A

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

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2
Q

Factors influencing globalisation

A

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

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3
Q

impacts of globalisation on consumers

A

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

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4
Q

impacts of globalisation on workers

A

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

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5
Q

impacts of globalisation on producers

A

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

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6
Q

comparative advantage

A

produce a good more cheaply relative to other goods

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7
Q

absolute advantage

A

produce a good more cheaply in absolute terms than another country

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8
Q

pros of specialisation

A

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

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9
Q

cons of specialisation

A

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

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10
Q

factors of patterns of trade

A

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

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11
Q

terms of trade

A

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

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12
Q

what increases terms of trade

A

increase price of exports
fallin price of imports

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13
Q

what is the terms of trade calculation

A

average export price index/average import price index x 100

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14
Q

short run influences on terms of trade

A

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

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15
Q

long run influences of terms of trade

A

-productivity
-changing incomes

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16
Q

impacts of changes of terms of trade

A

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

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17
Q

Trading blocs

A

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

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18
Q

preferential trading area

A

reduced tariffs and quotas on certain goods

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19
Q

free trade area

A

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

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20
Q

customs union

A

free trade area with common external barriers on external nations

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21
Q

common market

A

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

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22
Q

economic & monetary union

A

common market with same currency and central bank

23
Q

benefits of free trade

A

-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

24
Q

cons of free trade areas

A

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

25
Q

aims of the WTO

A

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

26
Q

what power do the WTO have

A

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

27
Q

conflicts of the WTO

A

they could be considered too powerful
they sometimes ignore developing countries

28
Q

types of protectionism

A

-subsidising domestic production
-tariffs
-quotas
-embargos

29
Q

Reasons for protectionism

A

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

30
Q

impacts if protectionism

A

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

31
Q

Three parts of the balance of payments

A

-current account
-financial account
-capital account

32
Q

what is the current account

A

trade in goods
trade in services
income and transfers

33
Q

what is in the financial account

A

fdi
portfolio investments
other investments

34
Q

causes of a current account deficit (short term)

A

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

35
Q

cause of a current account deficit (mid term)

A

loss of comparative advantage

36
Q

causes of a current account deficit (long term)

A

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

37
Q

ways to reduce imbalance of the BofP

A

-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)

38
Q

what are exchange rates

A

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

39
Q

what is a free floating exchange rate

A

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

40
Q

what is a managed floating exchange rate

A

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

41
Q

what is a fixed exchange rate

A

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

42
Q

factors affecting a floating exchange rate

A

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

43
Q

how can governments intervene to manipulate the exchange rates

A

-interest rates
-gold+foreign currency reserves

44
Q

how does raising interest rates increase the value of the pound

A

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

45
Q

why do countries devaluate their currencies

A

boost competitiveness

46
Q

how does a weaker currency boost competitive

A

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

47
Q

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

A

it is inflationary
other countries could follow

48
Q

impacts of changing exchange rates

A

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

49
Q

what are the measures of international competitiveness

A

relative labour costs
relative export prices

50
Q

factors influencing competitiveness

A

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

51
Q

pros of competitiveness

A

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

52
Q

cons of competitiveness

A

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

53
Q

how to reduce a current amount deficit

A

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

54
Q

cons of a current account deficit

A

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

Theme 4 (6 decks)

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