4.1 Flashcards
(44 cards)
1
Q
Globalisation
A
Growing interdependence of countries and rapid change it brings
2
Q
Globalisation
A
Inc integration of world’s local, regional and national economies into a single international market
3
Q
Factors affecting globalisation
A
- improvements in transport infrastructure
- improvements in IT and communication
- trade liberalisation
- international financial markets
- TNCs
4
Q
Improvement in transport infrastructure
A
Quick reliable cheap methods to allow production to be separated around the world
5
Q
Improvement in IT and communication
A
Companies able to operate across the globe
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
7
Q
International financial markets
A
Ability to raise money and move money around the world for international trade
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
9
Q
Impacts of globalisation
A
- consumers
- workers
- producers
- government
- environment
- economic growth
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
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
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
13
Q
Government
A
- receive higher taxes
- lose through tax evasion
- TNCs bribe and lobby governments = corruption
14
Q
Environment
A
- inc demand raw materials
- inc trade and production = emissions
- globalisation= world work together to tackle climate change
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
16
Q
Theory of comparative advantage
A
Countries find specialisation mutually advantageous if the opportunity costs of production are different
17
Q
Absolute advantage
A
Country produce good more cheaply in absolute terms than another country
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
Comparative advantage
- 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
Emerging economics
Shift trade by taking up larger proportion of imports and exports
27
Trading blocs and trading agreements
- Inc trade between countries and influence trade pattern
- e.g. UK trading more with EU countries
28
Exchange rates
- 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
Terms of trade
Measures rate of exchange of one product for another when two countries trade
30
Improvement
Country can buy more imports with same level of exports
31
Deterioration
Export prices fall or import prices ruse
32
Calculation for terms of trade
Average export price/average import price x 100
33
Factors of a country’s terms of trade
- improvement/deterioration
- exchange rates, inflation and changes in demand/supply of imports/exports
- improvement in productivity
- changing incomes
34
Improvement/ deterioration
Improvement- rise export/fall import prices
Deterioration- fall export price/inc import price
35
Productivity
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
Changing incomes
Affects patter of demand for g+s
Rise in world income causes rise in demand for tourism rising prices and inc trade
37
Prebisch singer hypothesis
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
Impact of changes:
PED
- PED of exports/imports inelastic then favourable movement in trade improve current account on BOP
- PED elastic favourable movement would worsen current account
39
Impact of changes:
Fall in gdp
- 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
Impact changes:
Export import revenues
- 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
Preferential trading area
PTA
Tariff and other trade barriers are reduced on some but not all goods traded between countries
42
Free trade areas
FTA
- Two or more countries agree to reduce trade barriers on goods
- each member imposes their own tariffs on goods imported outside trading bloc
43
Custom unions
- 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
Common markets
- trade barriers and tariffs removed
- micro economic policies and monopoly power tackled to be successful
- establish a single market
