4.1 international economics Flashcards
explain the characteristics of globalisation
- expansion in global trade
- higher number of mnc’s
- developments of global brands
- increased labour migration
- international sourcing
what are causes of globalisation
- containerisation
- better technology and communication
- reduced protectionism
- increased international financial flow
- mnc/fdi
what impact does globalisation have on consumers
- increased range of goods and services
- homogenisation of culture
- fall in price of goods and services
- increased supply
define absolute advantage
when a country can produce a good at a cheaper cost than another country
define comparative advantage
when a country can produce a good at a lower opportunity cost than another country
list the assumptions and limitations of comparative advantage
- 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
explain the benefits of trade
- 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
explain the costs of trade
- overdependence: europe with russian gas
- structural unemployment: change in trade pattern industry declines
- environment: increased transport
- inequality: worsen inequality
- exposure of infant industries
what is the trade pattern
- types of goods and services being produced in different regions and the significance of those regions
what is trade level
total amount of world trade
what factors affect the pattern of trade
- comparative advantage
- emerging economies
- trade blocs
- trade agreements
- exchange rates
how does comparative advantage affect trade pattern
newly emerging economies create shifts with new comparative advantages being created
how do emerging economies affect trade pattern
industrialisation means they can produce more of a high value good
how do trade blocs affect trade pattern
- increased trade in the bloc (trade creation)
- decreased trade out the bloc (trade diversion)
how do trade agreements affect the trade pattern
multinational bilateral trade agreements will increase trade
how do exchange rates affect trade pattern
- appreciation/depreciation of a currency affects trade
what shirt run factors influence the terms of trade
- supply/demand: ^demand- ^prices
- inflation
- exchange rates: strengthened currency
what long run factors influence terms of trade
- income: ^income- ^demand
- productivity: ^productivity- -costs
what are bilateral trade agreements
trade between two countries worldwide
what is a free trade agreement
- eliminates tariffs, import quotas
- e.g CEFTA, EFTA
what are customs unions
- free trade areas with common external trade policy (tariffs)
- EUCU
what are common markets
- free trade areas with common policies on product regulation
- e.g CIS, EEA
what are monetary unions
- common markets and currency
- e.g EUROZONE
what are the costs of regional trade agreements
- 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