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Economics Theme 4 > 4.1 International Economics > Flashcards

4.1 International Economics Flashcards

1
Q

Globalisation definition

A

growing integration of countries

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2
Q

Characteristics of globalisation

A

increased foreign ownership of firms
free trade in g/s
easy flow of capital
free movement of labour

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3
Q

Factors contributing to globalisation

A

improvement in transport
improvement in technology
trade liberalisation
MNCs looking to decrease costs

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4
Q

Impact of globalisation on consumers

A

more choice

can lead to lower prices due to firms taking advantage of lower costs of production

can lead to higher prices as incomes rise causing increased demand

loss of culture

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5
Q

Impact of globalisation on workers

A

large scale loss of jobs in the West as production has been taken to China etc

poor conditions

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6
Q

Impact of globalisation on producers

A

spreads risk as they can source to more countries
can employ low skilled workers

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7
Q

Globalisation impact on economic growth

A

increased investment in countries
new technology and techniques

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8
Q

Absolute Advantage definition

A

when a country can produce goods cheaper than another

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9
Q

Comparative Advantage definition

A

When a country produces a good at a lower opportunity cost than another

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10
Q

limitations of comparative and absolute theories

A

assumes there are no transport costs

assumes all goods are homogenous

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11
Q

Pros and cons of specialisation and trade

A

P-allows firms to benefit from economies of scale
-greater choice for consumers
-greater competition -> more innovation
-increased world output as firms produce what they are good at

C-over dependence
-can cause structural unemployment as jobs are lost to foreign firms
-environmental issues
-loss of culture

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12
Q

Factors influencing the pattern of trade

A

Comparative Advantage
-a change in comparative advantage will effect a firms trade pattern

Trade blocs
exchange rates

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13
Q

terms of trade calculation

A

average export price/ average import price x100

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14
Q

factors influencing terms of trade (x-m)

A

exchange rates
inflation
productivity
changing incomes

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15
Q

What is an FTA (Free Trade Area)

A

An agreement between countries of no barriers with countries inside bloc but can impose barriers on external countries

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16
Q

What is a custom union

A

no barriers between internal countries but a CET against non members

17
Q

What is a common market

A

free trade in country as well as free movement of FoPs

18
Q

What is a Monetary Union

A

a bloc with a central bank and a single currency eg EU

19
Q

Benefits of Trade agreements

A

encourages increased specialisation
larger customer market
creates jobs

20
Q

drawbacks of trade agreements

A

retaliation and new blocs can be made
reduction in competition if inefficient firms are
driven out

21
Q

Reasons for restrictions on free trade

A

protect infant industries
protect domestic jobs
protect domestic firms

22
Q

Main restrictions on free trade

A

tariffs
quotas
subsidies to domestic firms

23
Q

Impact of protectionist policies on consumers (2)

A

Higher prices on imports
less choice

24
Q

Impact of protectionist policies on producers

A

foreign producers miss out as their options are limited

25
Q

What is the balance of payments

A

money coming in and out of a country

26
Q

3 sections of the balance of payments

A

current account
financial account
capital account

27
Q

Causes of current account deficit

A

low productivity
high currency value
high inflation

28
Q

What is a floating exchange rate system

A

exchange rate determined by supply and demand

29
Q

What is a fixed exchange rate system

A

exchange rate set by the government

30
Q

What is a managed exchange rate system

A

combination of fixed and floating

31
Q

factors influencing floating exchange rate (s&d)

A

inflation
interest rates
speculation- when traders buy a currency expecting it to be worth more in the future to sell
net investment- FDI into the UK creates demand for the £

32
Q

How are interest rates used to change exchange

A

interest is raised to attract foreigners to move money into the UK

33
Q

impacts of changes in the exchange rate

A

economic growth- (as x-m is a component of AD)

cost push inflation as raw material prices increase
depreciation leading to an increase in net exports will shift AD

unemployment can decrease if a depreciation leads to a rise in exports as more workers are required to produce the additional products

more exports->more jobs->increase income->better standard of living

Economics Theme 4 (5 decks)

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