3.1 Flashcards
(34 cards)
What is a nominal value?
The current value of a measure at the time of recording. Not adjusted for changes in price.
What is a real value?
The relative value of a measure over time. Adjusted for changes in price and for inflation.
What is the equation for finding an index number?
Price value of year over price value of base year X100
Why are index numbers used?
To make quick and easy comparisons of values over time which easily show percentage increase/decrease compared to a base year.
How do you calculate real values from nominal values?
Nominal value over price level X100
What are the BRIC countries?
Refers to Brazil, Russia, India, and China. At the time these were the emerging economies with the greatest potential.
What is trade liberalisation?
The removal or reduction of restrictions or barriers on the free exchange of goods between nations
What is protectionism?
Government policies which restrict non-domestic trade or trade from outside of a bloc to protect a country’s industries. Usually done via tariffs and import quotas.
Which organisation regulates world trade?
WTO
What has happened due to increasing specialisation by country?
Deindustrialisation of the UK has moved the manufacturing sector to China and India who have now specialised in production due to lower labour costs. Their share of world trade has increased and the UK now specialise in services such as finance.
What is comparative advantage?
When one country can produce a good at a lower opportunity cost than another.
What is absolute advantage?
When one country can produce more of a good than another with the same resources/inputs.
What are the advantages of specialisation in the production of goods and services to trade?
Increased competition so lower average costs. Greater world output so increased economic welfare. Outward shift to the PPF curve. Increased supply of goods to choose from.
What are disadvantages of specialisation in the production of goods and services to trade?
Less developed countries might use their nonrenewable resources too quickly so they might run out. Countries could become too dependent on the export of one commodity.
What is free trade?
The act of trading between nations without protectionist barriers such as tariffs quotas or regulations.
What are three advantages of trade liberalisation and free trade?
Countries can exploit their comparative advantage leading to higher output. Increased economic efficiency by establishing a competitive market. Trade creation due to fewer barriers leading to increased consumption.
What is FDI?
The flow of capital from one country to another.
How is FDI linked to growth?
FDI can help create employment, encourage innovation, and provide low income countries with funds to invest and develop.
What is trade creation?
When a country consumes more imports from a low-cost producer and fewer from a high cost producer.
What is trade diversion?
When trade shifts to a less efficient producer.
How can trading blocs lead to trade diversion?
Protectionist barriers are often imposed on countries who are not members of the bloc so trade is diverted from producers outside the bloc producers within the bloc.
What are the different types of trading bloc?
Preferential trade area, free trade area, customs union, common market, economic union.
What is a preferential trade area?
Reduced but not eliminated barriers to trade among members.
What is a free trade area?
Where countries agree to trade goods with other members without protectionist barriers though they still maintain independent external barriers. This allows members to exploit their comparative advantages.
