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Economics Year 2 > 3.1.1 Growing economies > Flashcards

3.1.1 Growing economies Flashcards

1
Q

offshoring

A

Moving some/all production processes abroad; it could mean setting up a subsidiary company abroad or paying local contractors to manufacture the product or component

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2
Q

rationalisation

A

Reorganising production to achieve efficiency and use fewer resources to get the same output; eg making single dep for a function

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3
Q

nominal value

A

Value at current prices

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4
Q

current prices

A

Apply to data given at the price level at the year concerned

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5
Q

real values

A

Measure money values with the effect of inflation removed

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6
Q

constant prices

A

Are the prices that would have been in use without inflation

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7
Q

expansionary policies impact on borrowing

A
  • Issues with fiscal: COVID and financial crisis borrowing makes it difficult for government to borrow in future due to the size of these events
  • Issues with monetary: inflation is growing, so BoE puts interest rates up to keep spending down
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8
Q

India (productivity, infrastructure, gov, capital)

A
  • Similar population to China
  • More service sector compared to manufacturing and tech like China: China can add value in foreign market
  • India is largest democracy but with changing gov, so no long term planned economy
  • No universal education or healthcare, so low levels of education
  • Low quality housing in large cities compared to China, no centralised government building infrastructure
  • Railway built during British rule, so antiquated infrastructure
  • Not as productive as China, 6-7%
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9
Q

why do some countries stay poor

A
  • Primary sector countries —> resources without the ability to add value to it
  • commodities have fluctuating prices
  • Can’t effectively plan for future growth as prices fluctuate
  • What do you do when these natural resources run out? Need to develop other sectors when this runs out for sustainable long term economic strategy
  • Technology and capital lacking
  • Lack of property rights → no collateral to borrow to start business/go to school
  • If there are few skilled workers they wont attract investment
  • Government, war, political turmoil
    corruption → having to bribe officials may deter firms from investment in a country
  • May push domestic firms into black economy so they cannot access capital (banks wont loan to an illegal business)
  • Lack of international trade - export led growth is needed for countries with a domestic population with lower incomes
  • Geography
  • Many poor countries are landlocked
  • Climates can limit growth if crops cannot grow/trade is limited due to weather
  • Inequalities
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10
Q

growth in asia

A
  • Growth of asian tigers, South Korea, Taiwan, Honk Kong and Singapore
  • 1980 chinese gov decided to join in world trade to increase incomes
  • 1990s indian gov reformed policies to increase trade
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11
Q

increased economic power in africa

A
  • 2014 oil and commodity prices fell, affecting GDP in Nigeria and other exporting african countries; brazil exports in agricultural and mineral commodities declined fast
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12
Q

BRIC economic growth

A
  • 1989 USSR collapse and new russia gov increased trade with the rest of the world
  • 2000 emerging economies were industralising; people who worked in agriculture moved to cities where jobs were available and in manufacturing sector labour productivity was increasing fast
  • BRIC countries increased trade
  • 2010 china and india had 10% econ growth despite financial crisis
  • India growth 6% in 2016 and china slowed to 6.5%
  • Econ growth associated with volume of trade increases
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13
Q

growth due to the financial crisis

A
  • Growth slowed in developed countries after financial crisis of 2008-9, and this reduced demand for emerging markets
  • China growth based on high investment levels; needed to rebalance economy and encourage more consumer spending
  • India growth remains high
  • Slow growth in developed countries after FC reduced demand for imports
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14
Q

why patterns of trade are changing

A
  • Public opinion may shift towards protectionism but this would reduce real incomes for wage earniers
  • Brexit may alter trade patterns
  • New tech may decrease offshoring
  • Ageing pops may need more services not manufacturers
  • Political changes may disrupt some change
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15
Q

why is economic growth good

A
  • Higher living standards
  • Lowers unemployment
  • Increases tax revenue and gov spending on welfare
  • Accelerator effect: rising growth stimulates more investment
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16
Q

economic growth and technological change

A
  • Rise in productivity
  • Increase in GDP per worker
  • Lower costs
  • Higher wages and profits
  • New goods and services
  • Lower real prices
  • Increased standard of living
  • Improved health
  • Healthy life expectancy
  • Labour force expands
  • Increased productivity
  • Healthcare costs decrease and can invest elsewhere like education, increase skill of workforce
17
Q

drawbacks of economic growth

A
  • Economic growth has a risk of higher inflation and higher interest rates
  • Fast growing demand can lead to inflation
  • Central bank may increase interests rates as a result
  • Supply side policies cannot act as fast as demand pull inflation

Environmental effects
- More negative externalities like pollution and waste
- Risk of unsustainable extraction of finite resources → fast growing countries may cause a long run depletion of natural resources
- eg beijing olympics and suspending car and economic activity to reduce emissions
- Depends on type of economy and dependence on primary sector (developing economies)

  • Inequalities of income and growth
  • Rapid increases in real national income can lead to a higher level of inequality and social divisions
  • Many of the gains from growth may only go to a few people
18
Q

how does economic growth occur with production

A
  • Higher national output
  • Increased capital spending
  • Increased output per head
  • Increased wages/next incomes
  • Rising consumer demand
  • Higher national output etc
19
Q

individuals and economic growth

A
  • Individuals will have widening range of job opportunities and will be able to increase their incomes
  • People may migrate from agricultural areas to cities or other countries
  • Economic growth may lead to better health care, education and welfare but only if gov take action to achieve this
20
Q

firms and economic growth

A
  • Demand for people with scarce skills will be high as they need to enhance human capital cheaply; training may be available increasing productivity
  • Patterns of employment may change as businesses fail to compete in existing markets (eg where there is structural change)
  • Can they stay competitive with increased trade and interdependence? This makes markets more competitive in global markets (eg productivity, econ of scale etc)
  • Can offshore production for labour costs to be lower, or can engage in non price competition (reputation, branding, advertising, reliability, design etc)
21
Q

how does FDI help emerging economies

A
  • Outsourcing increases demand for manufacturers and ready supply of cheap labour keeps them competitive
  • Economic growth leads to increasing incomes and labour costs
  • Some businesses could thrive by investing and increasing prod, and increasing product range
  • Globalisation does encourage mergers and takeovers: create scope for economies of scale and access to new markets
  • Businesses that merge and rationslise will shut down departments that duplicate and cut costs
22
Q

global labour market

A
  • Benefits thos with scarce skills but hurts those will little skill and no bargaining power
  • Gobalisation has reduced poverty → 600 million chinese people
  • Even without good jobs, they have increased spending power thay flows into an economy
23
Q

people who gain from the global labour market

A
  • developed: Employees working in firms and highly skilled workers
  • emerging: People who move from farm work to manufacturing, especially if they benefit from training
24
Q

people who lose from the global labour market

A
  • developed: Low skilled workers in firms tgat cannot compete with foreign imports and shut down
  • emerging: People without scarce skills who have little bargaining power and poor working conditions
25
Q

nominal and real values

A
  • to see how much GDP/inflation has increased purchasing power_
  • real val = (nominal/price index)*100
26
Q

how should we handle economic data

A
  • Has it taken inflation into account —> real incomes
  • Has it taken the size of the population into account —> per head/per capita
  • Is it taking into account the income individuals can actually spend —> disposable income
27
Q

calculating and interpreting index numbers

A
  • Indexes allow for making comparisons, ruling out differences in economies allowing for comparisons across countries and time
  • In exam, comment on how data is recorded and why that is important
  • Nominal means money
  • Real takes into inflation

Index number in year Y = (data value in year Y / Base year Value) x 100

Economics Year 2 (13 decks)

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