3.1: Globalisation Flashcards
How can expansionary monetary policy promote short term rapid real GDP growth?
Interest rates decreased,
less incentive to save,
more incentive to spend,
cheaper to borrow,
investing increases,
injections in economy increase
Why hasn’t the govt enforced expansionary monetary policy at the moment?
Aggregate demand increases, leading to inflation,
inflation is already high at the moment so do not want to further increase,
no oil from Russia + wheat from Ukraine,
commodity price increases,
cost-push inflation
How can expansionary fiscal policy promote short term real GDP growth?
Taxes are cut,
government spending increases,
increasing injections,
increasing aggregate demand
How can a favourable exchange rate promote short term real GDP growth? WITH EXAMPLE
Weak pound,
imports dear,
exports cheap
E.G: China,
govt has lots of control over economy,
Yuan purposefully held low,
focus on export-led growth,
developing countries often focus on this,
average income of population lower so less demand,
overseas population has higher average income,
higher demand,
stimulates growth
Give 4 examples of long term causes of real GDP growth.
Increased investment spending on a country’s productive capacity
Growth spillovers from invention and innovation
Growth benefits from increased government spending on public goods, merit goods and other infrastructure (schools + hospitals)
Expanding population and growing active labour supply
Describe fiscal deficit
Low taxes + high spending,
Increased borrowing - harder to borrow now, due to huge levels of govt borrowing previously,
2008 + 2020 - bailing out banks in FC and covid-19
interest payments - BHM?, situation
Spending differences for different tax cuts
Working people - more likely to be spent, injections into economy
Super rich - more likely to be saved overseas etc
What are the main 4 benefits of economic growth?
Higher living standards - Real GNI per capita
Stimulates jobs and contributes to lower unemployment rates - helps reduce income inequality
Fiscal dividend - higher economic growth raise tax revenues + reduce govt spending
Name the countries that are part of the Asian Tigers
Taiwan
South korea
hong kong
singapore
Define purchasing power parity
figures that have been calculated to reflect the purchasing power of incomes
excellent measure of average standard of living
What has happened to the Chinese economy over recent decades?
increased food production dramatically
lifted an estimated 800 million out of poverty
developed own technologies
benefitted from tech transfer - by FDI
grown faster than other bric economies
What is a tech transfer?
mncs locate in developing countries
trains people in the skills needed to implement new technologies
over time employees move to other firms and provide training
What is chinese consumption like?
total consumption is less than 50% of gdp - consumers save more than they spend
What is income distribution in China like?
very unequal
tax is low and widely evaded - very little welfare funding
What is an open economy?
exports and imports form a significant proportion of gdp
What is the current Chinese economic growth rate?
projected to be 4.6%
economic slow down compared to previous rapid growth
China’s GDP per capita 2023
$22,100
India’s GDP per capita 2023
$9,200
UK’s GDP per capita 2023
$54,500
Mongolia’s GDP per capita 2023
$16,200
How do you calculate an index number?
100 * (value to be converted / value of base)
What do index numbers show?
relative changes so we can make easy comparisons
What is the formula to convert nominal prices to constant prices?
(nominal value * 100) / price index
What is a nominal value?
value at current prices
