4.1 Flashcards
what is gross domestic product
total value of goods produced and services provided in a country within a given period of time
UK growth tends to be lower than emerging economies
- growth of the manufacturing sector
- businesses choose to manufacture in emerging economies due to lower labour costs and access to raw materials
what is globalisation
economic integration of different countries through increasing freedoms in the cross-border movement of people, goods, technology & finance
Emerging economic powers of countries within Asia, Africa and other parts of the world include
BRICS: Brazil, Russia, India, China and South Africa
MINT: Mexico, Indonesia, Nigeria and Turkey
the implications of economic growth
Impacts on Businesses
- Reduced costs as firms benefit from lower labour costs and cheaper raw materials
- Increased trade opportunities as demand for goods and services increases
the implications of economic growth
Impacts on Individuals
- Reduced unemployment as there is more demand, which requires more labour to increase output
- Increased average incomes as individuals due to employment, which increases the standard of living
- Access to quality public services as tax revenue is generated. The government improves public services
There are four key indicators used to assess the economic growth of emerging economies
- literacy
- health
- GDP per capita
- Human Development index - HDI
What is GDP per capita
is calculated by taking the total output (GDP) of a country and dividing it by the number of people in that country
what is protectionism
any method that restricts free trade
tariff definition
a tax placed on an import to increase its price and decrease in demand. this shifts demand for that product from foreign businesses to domestic businesses
quota definition
physical limit on the quantity of a good imported or exported
The benefits of tariffs include
- protect infant industries so they can eventually become more competitive globally
- increase in government tax revenue
- domestic goods will be cheaper
- ensures better job security
The disadvantages of tariffs include
- high import prices won’t put people off
- unfair competition
- Tariffs may increase prices for consumers
the effect of quota
Restricting the physical amount of imports means that domestic businesses face less competition and benefit from a higher market share
The benefits of import quotas include
- To meet extra demand, domestic businesses may hire more workers which reduces unemployment and benefits the wider economy
- higher prices for the product may encourage new businesses to start up in the industry
- Countries can easily change import quota as market conditions change
- their exporters can still sell their goods at a higher price in domestic markets (but a limited amount)
The disadvantages of import quotas include
- Quotas limit the supply of a product and whenever supply is limited, the price of the product rises
- this generates tension in the relationship with trading partners
- reduces the level of competition
what is a subsidy
is an amount of money given by the government to protect particular industries. they lower prices making the price more competitive
what is a Trading bloc?
a group of countries that has signed an agreement to reduce/eliminate tariffs, quotas and other protectionist measures within themselves.
Different types of trading blocs
- Preferential trade arrangements (PTA)
- Free trade areas (FTA)
- Customs unions (CU)
- Common markets
- Economic unions
Preferential trade arrangements
provide lower barriers on some trade among participating nations than on trade with non-member nations. It is the loosest form of economic integration.
A free trade area
is the form of economic integration where all barriers are removed on trade among members, but each retains its barriers to trade with nonmembers
A Customs Union
allows no tariffs or other barriers on trade among members, and it harmonizes trade policies (e.g. setting of common tariff rates) toward the rest of the world
A Common Market
goes beyond a customs union by allowing the free movement of labour and capital among member nations. The EU achieved the status of a common market at the beginning of 1993.
Economic Union
a trade agreement between countries that aims to increase economic integration. It allows for the free movement of goods, services, capital, and labor across borders.
Benefits of trade blocs
- Foreign Direct Investment
- Economies of Scale
- Competition: bring businesses in numerous countries closer together, resulting in greater competition
- Greater trade: trading blocs reduce protectionist measures e.g. tariffs and quotas, which stimulate greater demand
- Market efficiency
What is foreign direct investment
taking a minimum of 10% ownership in a company in a different country
e.g. merger/ takeover
Motivations for FDI
- higher profits
- acess global markts
- reduced ecnolgoical barriers
- avodiacne of transport costs and tariff/ non-tariff barriers
- extend product life cycles by marketing products in new countries
