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Economics > 4.1 international economics > Flashcards

4.1 international economics Flashcards

1
Q

explain the characteristics of globalisation

A
  • expansion in global trade
  • higher number of mnc’s
  • developments of global brands
  • increased labour migration
  • international sourcing
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2
Q

what are causes of globalisation

A
  • containerisation
  • better technology and communication
  • reduced protectionism
  • increased international financial flow
  • mnc/fdi
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3
Q

what impact does globalisation have on consumers

A
  • increased range of goods and services
  • homogenisation of culture
  • fall in price of goods and services
  • increased supply
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4
Q

define absolute advantage

A

when a country can produce a good at a cheaper cost than another country

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5
Q

define comparative advantage

A

when a country can produce a good at a lower opportunity cost than another country

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6
Q

list the assumptions and limitations of comparative advantage

A
  • no transport costs (false)
  • constant costs (will encounter economies of scale)
  • 2 economies producing 2 goods (cant be dependent on another country)
  • goods are homogeneous (false)
  • no tariffs/trade barriers
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7
Q

explain the benefits of trade

A
  • comparative advantage: more specialisation+supply
  • econ of scale: increased market size
  • increased competition: incentive to be more efficient
  • more choice: higher quality goods at lower cost
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8
Q

explain the costs of trade

A
  • overdependence: europe with russian gas
  • structural unemployment: change in trade pattern industry declines
  • environment: increased transport
  • inequality: worsen inequality
  • exposure of infant industries
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9
Q

what is the trade pattern

A
  • types of goods and services being produced in different regions and the significance of those regions
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10
Q

what is trade level

A

total amount of world trade

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11
Q

what factors affect the pattern of trade

A
  • comparative advantage
  • emerging economies
  • trade blocs
  • trade agreements
  • exchange rates
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12
Q

how does comparative advantage affect trade pattern

A

newly emerging economies create shifts with new comparative advantages being created

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13
Q

how do emerging economies affect trade pattern

A

industrialisation means they can produce more of a high value good

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14
Q

how do trade blocs affect trade pattern

A
  • increased trade in the bloc (trade creation)
  • decreased trade out the bloc (trade diversion)
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15
Q

how do trade agreements affect the trade pattern

A

multinational bilateral trade agreements will increase trade

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16
Q

how do exchange rates affect trade pattern

A
  • appreciation/depreciation of a currency affects trade
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17
Q

what shirt run factors influence the terms of trade

A
  • supply/demand: ^demand- ^prices
  • inflation
  • exchange rates: strengthened currency
18
Q

what long run factors influence terms of trade

A
  • income: ^income- ^demand
  • productivity: ^productivity- -costs
19
Q

what are bilateral trade agreements

A

trade between two countries worldwide

20
Q

what is a free trade agreement

A
  • eliminates tariffs, import quotas
  • e.g CEFTA, EFTA
21
Q

what are customs unions

A
  • free trade areas with common external trade policy (tariffs)
  • EUCU
22
Q

what are common markets

A
  • free trade areas with common policies on product regulation
  • e.g CIS, EEA
23
Q

what are monetary unions

A
  • common markets and currency
  • e.g EUROZONE
24
Q

what are the costs of regional trade agreements

A
  • harder to trade out of bloc
  • differing needs make it hard to find common tariff
  • easier outward migration of labour
  • can not manipulate exchange rate
  • infant industries are less protected
  • hard to achieve export led growth
25
Q

what are the benefits of regional trade agreements

A
  • eliminates tariffs
  • easier trade in bloc
  • increased exports
  • increased regional stability
  • larger labour pull
  • larger market
26
Q

what are tariffs

A

tax placed on imported goods

27
Q

what are import quotas

A

limit on the quantity of a good that can be imported

28
Q

what are non tariff barriers

A

safety standards for goods

29
Q

what reasons are there for restrictions on free trade

A
  • protect infant industries
  • protection against dumping: selling goods below the production cost
  • control import spending to balance current account
30
Q

reasons against protectionism domestically

A
  • lack of incentive for infant industry to be efficient
  • only a short term solution
  • higher prices
31
Q

what impact do protectionist policies have on consumers

A

importer: ^prices, -consumer surplus,
exporter: loss of jobs, impact on income

32
Q

what impact do protectionist policies have on producers

A

exporters: -exports, -profits
importer: -competition, x-inefficient, tariff dependent

33
Q

evaluate the impact of protectionist policies in governments

A
  • exporter: - demand for exports
    -importer: worsen current account, can start trade war
34
Q

what is the impact of protectionist policies on inflation

A
  • importer: imported inflation due to high prices
  • exporter: deflationary effevt
35
Q

what is a floating exchange rate

A
  • currency determined by foreign exchange market
36
Q

what is a fixed exchange rate

A
  • when a currency is pinned to another currency or a commodity like gold
37
Q

what is the difference between revaluation and appreciation of a currency

A
  • revaluation are official changes in a countries value of currency
  • appreciation is due to natural market forces
38
Q

benefits if a floating exchange rate

A
  • robust: more robust
  • current account deficit can self correct
39
Q

benefits of a fixed exchange rate

A
  • reduced volatility: encourages trade and confidence
  • financial discipline: discipline on gov not to over spend
40
Q

what factors affect a floating exchange rate

A
  • demand for exports - more foreign currency converted to domestic currency
  • demand for imports - +demand for imports -> +supply of currency
  • investment flows + inward flow of investment +demand for currency
  • speculation - forecasts
41
Q

what factors influence international competitiveness

A
  • rise in exchange rates makes goods less competitive imports more
  • rise in productivity lowers AC, rise in labour productivity leads to fall in unit labour costs
  • rise in wages reduces competitiveness
  • other non wage costs (pensions)
  • tighter regulation increases costs

Economics (12 decks)

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