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Theme 4 Daniel > 4.1 > Flashcards

4.1 Flashcards

1
Q

Globalisation

A

Growing interdependence of countries and rapid change it brings

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2
Q

Globalisation

A

Inc integration of world’s local, regional and national economies into a single international market

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3
Q

Factors affecting globalisation

A
  • improvements in transport infrastructure
  • improvements in IT and communication
  • trade liberalisation
  • international financial markets
  • TNCs
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4
Q

Improvement in transport infrastructure

A

Quick reliable cheap methods to allow production to be separated around the world

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5
Q

Improvement in IT and communication

A

Companies able to operate across the globe

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6
Q

Trade liberalisation

A
  • Cheaper and more feasible to trade since 1945
  • breakdown of soviet bloc and opening of china shown area for business to expand into
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7
Q

International financial markets

A

Ability to raise money and move money around the world for international trade

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8
Q

TNCs

A
  • Large companies inc their own profits and take advantage of low labour costs
  • sell and produce goods around world and have power to lobby governments
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9
Q

Impacts of globalisation

A
  • consumers
  • workers
  • producers
  • government
  • environment
  • economic growth
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10
Q

Consumers

A
  • consumers more choice due to range of goods
  • lower prices as firms take advantage of comparative advantage and produce in countries with lower costs
  • other cases leads to rise in prices as incomes are rising
  • possible loss of culture
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11
Q

Workers

A
  • large scale job losses in western world due to manufacturing moving to countries such as china
  • inc migration affect worked by lowering wages
  • migrants provide important skills inc AD
  • international competition led to a fall in wages for developed and inc wages for developing
  • skilled workers inc wages inc inequality
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12
Q

Producers

A
  • firms source products from more countries and sell in more countries reducing risk of impact on business
  • employ low skilled workers cheaper in developing countries and exploit to have larger markets
  • firms who aren’t global lose out
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13
Q

Government

A
  • receive higher taxes
  • lose through tax evasion
  • TNCs bribe and lobby governments = corruption
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14
Q

Environment

A
  • inc demand raw materials
  • inc trade and production = emissions
  • globalisation= world work together to tackle climate change
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15
Q

Economic growth

A
  • inc investment —> inc injection and inc multiplier. Creates incentive to make supply side improvements
  • TNCs bring world class management techniques and technology
  • trade inc output allows exploitation of comparative advantage
  • power of TNCs cause political instability as they support undemocratic regimes
  • companies may leave countries when there’s no gain causing structural unemployment and reduce growth
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16
Q

Theory of comparative advantage

A

Countries find specialisation mutually advantageous if the opportunity costs of production are different

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17
Q

Absolute advantage

A

Country produce good more cheaply in absolute terms than another country

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18
Q

Comparative advantage

A

Country able to produce good more cheaply relative to other goods produced

19
Q

Numerical approach

A

Pic from cr

20
Q

Diagrammatic approach

A

Pic cr

21
Q

Assumptions limitations comparative advantage theory (cat)

A
  • no transport costs to lower cat
  • costs are constant and no economics of scale
  • goods are homogenous but products aren’t making it difficult to say there’s a ca as they can’t be compared
  • fop perfectly mobile, no tariffs/ trade barriers
22
Q

Advantages specialisation of trade

A
  • shows how world output can inc when countries specialise in what they’re best at producing inc global economic growth
  • benefit from economies of scale dec costs dec global price
  • dif countries dif fop trade benefit everyone
  • consumers have inc choice inc consumer welfare
  • inc competition incentive to innovate
  • countries isolate themself due to politics= economies stagnate
23
Q

Disadvantages specialisation of trade

A
  • trade lead to over dependence on certain exports/ imports problems if large price falls
  • structural unemployment jobs lost to foreign firms who are more efficient/ competitive
  • problem in Manchester due to traditional industries dec e.g ship building
  • environment suffers e.g. transports/ deforestation
  • loss of sovereignty due to international treaties
  • loss of culture due to foreign ideas/ products
24
Q

Factors influencing pattern of trade

A
  • comparative advantage
  • emerging economies
  • trading blocs and bilateral trading agreements
  • relative exchange rates
25
Q

Comparative advantage

A
  • change in CA affects trade pattern
  • inc in exports of goods from developing countries to developed ones
  • developing countries have advantage due to lower labour costs
  • deindustrialisation of countries means manufacturing dec
  • ageing pop means wage competitiveness falls
26
Q

Emerging economics

A

Shift trade by taking up larger proportion of imports and exports

27
Q

Trading blocs and trading agreements

A
  • Inc trade between countries and influence trade pattern
  • e.g. UK trading more with EU countries
28
Q

Exchange rates

A
  • Affects relative prices of goods between countries
  • e.g. UK trade deficit with Europe due to strong £ but china keep currency weak to make exports competitive
29
Q

Terms of trade

A

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

30
Q

Improvement

A

Country can buy more imports with same level of exports

31
Q

Deterioration

A

Export prices fall or import prices ruse

32
Q

Calculation for terms of trade

A

Average export price/average import price x 100

33
Q

Factors of a country’s terms of trade

A
  • improvement/deterioration
  • exchange rates, inflation and changes in demand/supply of imports/exports
  • improvement in productivity
  • changing incomes
34
Q

Improvement/ deterioration

A

Improvement- rise export/fall import prices
Deterioration- fall export price/inc import price

35
Q

Productivity

A

Improvement of productivity compared to country’s trading partners dec trade as export prices fall relative to import
E.g. technology or more efficient labour

36
Q

Changing incomes

A

Affects patter of demand for g+s
Rise in world income causes rise in demand for tourism rising prices and inc trade

37
Q

Prebisch singer hypothesis

A

Long run price of primary goods declines in proportion to manufactured goods so those dependent on primary exports will see a fall in trade

38
Q

Impact of changes:
PED

A
  • PED of exports/imports inelastic then favourable movement in trade improve current account on BOP
  • PED elastic favourable movement would worsen current account
39
Q

Impact of changes:
Fall in gdp

A
  • improvement of trade dec GDP
  • rise unemployment if causes by inc export price
  • if export fall due to import dec then imports rise
  • both cause reduction in production within country and dec employment
  • long term decline trade suggests long term decline in living standards as less imports bought
40
Q

Impact changes:
Export import revenues

A
  • improvement caused by inc demand for exports= beneficial for country
  • deterioration caused by improvement in international competitiveness= beneficial
  • export and import revenues more important that price
  • for an improvement to be beneficial export revenues must inc
41
Q

Preferential trading area
PTA

A

Tariff and other trade barriers are reduced on some but not all goods traded between countries

42
Q

Free trade areas
FTA

A
  • Two or more countries agree to reduce trade barriers on goods
  • each member imposes their own tariffs on goods imported outside trading bloc
43
Q

Custom unions

A
  • removal of tariffs barriers between members and acceptance of common external tariffs against non members
  • members negotiate as a single bloc with third parties such as other trading bloc
44
Q

Common markets

A
  • trade barriers and tariffs removed
  • micro economic policies and monopoly power tackled to be successful
  • establish a single market

Theme 4 Daniel (1 decks)

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