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A Level Economics > 4.1 - International Economics > Flashcards

4.1 - International Economics Flashcards

1
Q

Closed economy

4.1.1 - Globalisation

A

An economy operating without imports or exports, i.e. closed to global trade

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1
Q

Containerisation

4.1.1 - Globalisation

A

A system of freight transport for use in sea shipping that has reduced the transport costs of shipping many thousands of different goods across the globe

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2
Q

Deglobalisation

4.1.1 - Globalisation

A

The process of diminishing interdependence and integration between economies acround the globe

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3
Q

Foreign direct investment

4.1.1 - Globalisation

A

FDI is the accquisition of a controlling interest in productive operations abroad by businesses resident in the home economy. May involve the creation of new productive capacity such as a new factory or building of infrastructure

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4
Q

Globalisation

4.1.1 - Globalisation

A

The deepening of relationships between countries of the world reflected in an increasing level of cross-border trade and investment and migration

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5
Q

Mercantilism

4.1.1 - Globalisation

A

The notion that the wealth of a nation was based on how much it couild export in excess of its imports, and thereby accumulate precious metals. Applied in the modern context to countries accumulating huge trade surpluses and focusing on export-let growth

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6
Q

Multinational companies

4.1.1 - Globalisation

A

A MNC has facilities and other assets in at least one country other than its home country

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7
Q

Open economy

4.1.1 - Globalisation

A

An economy with low tariff and non-tarriff barriers which is deeply integrated into the regional and global economy

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8
Q

Transnational companies

4.1.1 - Globalisation

A

TNCs base their manufacturing, assembly, research and retail operations in a number of countries

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9
Q

Absolute advantage

4.1.2 - Specialisation and trade

A

Occurs when a country can produce a product using fewer resources than another nation. If a country using the same factors of production can produde more of a product, then it has an absolute advantage

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10
Q

Comparative advantage

4.1.2 - Specialisation and trade

A

Refers to the relative advantage that one country or producer has over another. A country can benefit from specializing in and exporting the product(s) for which it has the lowest opportunity cost of supply

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11
Q

Dynamic gains from trade

4.1.2 - Specialisation and trade

A

Dynamic gains from trade make a domestic economy more productive. Examples of gains from trade liberalization that fall into this category are: Diffusion of knowledge and technology, economies of scale and increased competition and innovation

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12
Q

Fairtrade

4.1.2 - Specialisation and trade

A

Trade between companies in developed countries and producers in developing countires in which fair prices are paid to producer

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13
Q

Free trade

4.1.2 - Specialisation and trade

A

When trade in goods and services between nations is allowed to occur without any form to import restriction

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14
Q

Relative export prices

4.1.2 - Specialisation and trade

A

A country’s export prices relative to those of a competing economy

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15
Q

Specialisation

4.1.2 - Specialisation and trade

A

When individuals, regions or countries concentrate on making one product to create a surplus to trade

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16
Q

Trade creation

4.1.2 - Specialisation and trade

A

Trade creation occurs when a country enters a free trade area/agreement or becomes involved in a customs union in which there is free trade between members but also a common external tariff. Trade creation is the movement from a high cost source of output to a lower cost source of supply as a result of joining a trade agreement

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17
Q

Trade diversion

4.1.2 - Specialisation and trade

A

Trade diversion is a feature of a country deciding to join a customs union i.e. an area where there is free trade within a customs union but also a common external tariff. Trade diversion is a switch from lower-cost foreign source/supplier outside of a customs union towards a higher-cost supplier located inside the customs union

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18
Q

Bilateral trade agreement

4.1.3 - Pattern of trade

A

An agreemnt to lower import tariffs and other trade barriers between two countries - for example between South Korea and Australia

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19
Q

Competitiveness

4.1.3 - Pattern of trade

A

External competitiveness is the sustained ability to sell goods and servcices profitably at competitive prices in a foreign country. The core measure of competitiveness is a nation’s relative unit labour costs expressed in a common currency

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20
Q

Exchange rate

4.1.3 - Pattern of trade

A

The external value of currency

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21
Q

Intra-regional trade

4.1.3 - Pattern of trade

A

Intra-regional trade is the exchange of virtually identical products between countries within the same region

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22
Q

Trading bloc

4.1.3 - Pattern of trade

A

A group of countries co-operating to liberalize trade between each other

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23
Q

Prebisch-Singer Hypothesis

4.1.4 - Term of trade

A

This is an observaqtion (not a theory) that states that the terms of trade between primary goods and manufactured products deteriorate over time. The Prebisch-Singer Hypothesis (PSH) suggests that, over the long run, prices of primary goods such as coffee and cocoa decline in proportion to prices of manufactured goods such as cards and washing machines

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24
Q

Relative export prices

4.1.4 - Term of trade

A

A country’s export prices relative to those of competing economy

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25
Q

Terms of Trade

4.1.4 - Term of trade

A

The terms of trade (also known as the real exchange rate) is the real value of countries exports in terms of their imports. Thus, it is a function of the price levels in the domestic and foreign country and the nominal exchange rate

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26
Q

Anti-dumping tariffs

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

Anti-dumping import tariffs are allowed under World Trade Organisation rules when cases of dumping have been establised

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27
Q

ASEAN

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

Association of Southeast Asian Nations - a regional trade bloc

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28
Q

Bilateral trade agreement

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

An agreement to lower import tariffs and other trade barriers between two countries - for example between South Korea and Australia

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29
Q

Common External Tariff (CET)

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

A CET is an import tarrif applied equally by each country participating in a customs union, e.g. the EU might impose a common tariff on imported whisky from Japan

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30
Q

Common market

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

A single market providing for participating countries free trade in goods and services and free moment of labour and capital. The European Union is a single market

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31
Q

Customs union

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

A group of countries that abolish tariffs and quotas between member nations to encourage free movement of goods and services. Adopt a common external tariff on imports from non-member countries. The European Union is a customs union

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32
Q

European Free Trade Agreement (EFTA)

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

European Free Trade Association consists of Norway, Iceland, Switzerland and Leichtenstein

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33
Q

European Union (EU)

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

As of January 2017, there are twenty-eight member nations of the EU - collectively known as EU28. The UK voted to leave the EU in June 2016

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34
Q

Eurozone

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

This consists of those member states of the EU that use the Euro as their currency

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35
Q

Free trade area

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

A free trade area (FTA) is one where there no tariffs or taxes or quotas on goods and/or services from one country entering another

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36
Q

Monetary union

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

An intergovernmental agreement that involves two or more stats shareing the same currency

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37
Q

NAFTA

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

North American Free Trade Agreement - a free trade area agreement signed by the US, Canada and Mexico. This has now been replaced by the USMCA agreement

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38
Q

Non-tariff barrier

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

Trade barriers such as import quotas, embargoes and export subsidies

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39
Q

Pacific Alliance

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

Trade agreement between Chile, Colombia, Mexico and Peru

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40
Q

Regional trade agreement

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

An agreement to lower import tariffs and other trade barriers between countries in a certain region

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41
Q

SAFTA

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

South Asian Free Trade Area comprising Afghanistan, Bangladesh, Bhutan, India, Maldivves, Nepal, Pakistan and Sri Lanka

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42
Q

Schengen Area

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

26 country passport-free area inside Europe

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43
Q

Single market

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

A single market represents a deeper form of economic integration than a customs union. It invovles the free movement of goods and services, capital and labour

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44
Q

Trade liberalisation

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

Reductions in import tariffs and non-tariff barriers to enhance trade between one or more countries

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45
Q

Trading bloc

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

A group of countries co-operating to liberalize trade between each other

46
Q

Transition economies

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

Former countries of the Eastern Bloc that have been engaged in a transition from being largely command economies to market systems with a greater role for private enterprise and resource allocation via the price mechanism

47
Q

World Trade Organisation (WTO)

4.1.5 - Trading blocs and the World Trade Organisation (WTO)

A

The WTO polices free trade agreements and decide on trade disputes between countries. It arranges trade negotiations to liberalize trade for member countries by mutually agreed reductions in tariffs & quotas and opening domestic markets up to foreign competition

48
Q

Ad valorem tariff

4.1.6 - Restrictions on free trade

A

An import tariff rate charged as percentage of the price

49
Q

Beggar my Neighbour

4.1.6 - Restrictions on free trade

A

A policy that seeks to promote a country’s economy at the expense of another country. An obvious example is the use of tariff barriers. A country may place a tariff on imports to help promote local domestic industry. This may help reduce local unemployment, but, be at the expense of the other country’s export sectors

50
Q

Countervailing tariffs

4.1.6 - Restrictions on free trade

A

An additional import tariff (tax) imposed on imported goods to offset subsidies providded to producers or exports by the government of the exporting country

51
Q

Creeping protectionism

4.1.6 - Restrictions on free trade

A

A period of time where import tariff rates rise and where countries introduce quotas and barriers to the mobility of labour and capital

52
Q

Dumping

4.1.6 - Restrictions on free trade

A

When a producer in one country exports a product to another country at a price which is below the price it charges in its home market or is below average costs of production

53
Q

Economic nationalism

4.1.6 - Restrictions on free trade

A

The idea that a country’s economy will perform best if its industries are protected from competition, for example by taxes on imported goods or barriers to foregin takovers

54
Q

Export quota

4.1.6 - Restrictions on free trade

A

A restriction on the volume of exports that can be sold overseas - this acts as a supply constraints in international markets and can lead to higher prices in global markets

55
Q

Infant industry

4.1.6 - Restrictions on free trade

A

New/fledging industry that may require government protectionj from overseas competition (for instance through the setting of import tariffs) in order to develop

56
Q

Market liberalization

4.1.6 - Restrictions on free trade

A

Removing state controls that impede the normal functioning of a market economy - for example, lifting prices and wage controls and import quotas or lowering import tariffs

57
Q

Protectionism

4.1.6 - Restrictions on free trade

A

Tariff and non-tariff restrictions on imports to protect domestric producers

58
Q

Quota

4.1.6 - Restrictions on free trade

A

A quota is a trade barrier that imposes a physical limit on the quantity of a good that can be imported into a country in a given time period

59
Q

Subsidy

4.1.6 - Restrictions on free trade

A

Payments by the government to domestic suppliers that reduce their costs and thus make domestic output cheaper than imported goods and services

60
Q

Tariff

4.1.6 - Restrictions on free trade

A

A tax on the value of imported products - can be specific or ad valorem

61
Q

Trade barriers

4.1.6 - Restrictions on free trade

A

Ways in which trade is controlled for example an import tariff, quota or embargo

62
Q

Trade liberalisation

4.1.6 - Restrictions on free trade

A

Reductions in import tariffs and non-tariff barriers to enhance trade between one or more countries

63
Q

Capital account (BoP)

4.1.7 - Balance of payments

A

Formerly known as financial account, now a small section of the account which includes effects of debt forgiveness, sale/transfer of patents, copyrights, franchises, leases and other transferable contracts across borders

64
Q

Capital flows

4.1.7 - Balance of payments

A

Movements of capital between countries. Outward capital flows are movements of domestically owned capital abroad; inward capital flows are movement of foreign-owned capital to the domestic economy

65
Q

Creditor nations

4.1.7 - Balance of payments

A

Those nations that have a balance of payments surplus on the current account

66
Q

Current account

4.1.7 - Balance of payments

A

Measures the difference between money and credit going in and out of an economy (through exports, imports and income paid on assets both home and abroad)

67
Q

Current account deficit

4.1.7 - Balance of payments

A

The amount by which money relating to trade and investment income going out a country is more than the amount coming in

68
Q

Current account surplus

4.1.7 - Balance of payments

A

The amount by which money relating to trade and investment income going out of a country is less than the amount coming in

69
Q

Debtor nations

4.1.7 - Balance of payments

A

Those nations that have a persistent balance of payments deficit on the current account

70
Q

Domestic remittances

4.1.7 - Balance of payments

A

Money received from family members or friends living in a different city of their own country

71
Q

Expenditure-reducing policies

4.1.7 - Balance of payments

A

Policies designed to lower real incomes and aggregate demand and thereby cut demand for imports e.g. higher direct taxes or increase interest rates

72
Q

Expenditure-switching policies

4.1.7 - Balance of payments

A

These are policies designed to change the relative prices of exports and imports. For example - an exchange rate depreciation ough to improve the price competitiveness of exports and also make imports more expensive

73
Q

Export revenue

4.1.7 - Balance of payments

A

Sales from selling goods and services overseas

74
Q

Export subsidies

4.1.7 - Balance of payments

A

A financial benefit conferred on a firm by the government that is contingent on exports

75
Q

External debt

4.1.7 - Balance of payments

A

External debt is owed by government, households and businesses in a country to external (overseas) creditors. Examples include government bonds sold to foreign investors and private sector credit from foreign banks. The scale of external debt is measured as a % of a country’s GNI

76
Q

External demand

4.1.7 - Balance of payments

A

External demand is the net change in demand for goods and services from international trade. Net trade = the value of exports (X) minus value of imports (M). Net trade is positive when a country runs a trade surplus and negative with a trade deficit

77
Q

Financial account (BoP)

4.1.7 - Balance of payments

A

Transactions that result in a change of ownership of financial assets and liabilities betweeen residents of different countries - includes net flows of money into equities, bonds, property

78
Q

Foreign direct investment

4.1.7 - Balance of payments

A

FDI is the acquisition of a controlling interest in productive operations abroad by businesses resident in the home economy. May involve the creation of new productive capacity such as a new factory or building of infrastructure

79
Q

Hot money

4.1.7 - Balance of payments

A

Money that flows freely and quickly around the world looking to earn the best rate of return. It might be invested in any asset whose value is expected to rise or simply be placed in an ccount offering the best real rate of interest

80
Q

Portfolio investment

4.1.7 - Balance of payments

A

Portfolio investment happens when people/businesses from one country buy shares or other securities such as bonds in other nations. For example: A UK investor might by some shares in Google (portfolio investment outflow for the UK) or a German investment bank might by some of the soverign debt issued by the UK government (a portfolio investment inflow for the UK)

81
Q

Primary income (BoP)

4.1.7 - Balance of payments

A

The net flow of profits, interest and dividends from investments in other countries and net remittance flows from migrant workers

82
Q

Remittances

4.1.7 - Balance of payments

A

When migrants send home parts of their earnings in the form of either cash or goods to support their families. A net inflow of remittances adds to a nation’s GNI

83
Q

Secondary income (BoP)

4.1.7 - Balance of payments

A

Net flow of overseas aid/debt relif, military grants and so on

84
Q

Structural trade deficit

4.1.7 - Balance of payments

A

A trade deficit that arises due to supply-side weaknesses rather than a chaneg in GDP or currency - caused by poor competitiveness

85
Q

Appreciation of currency

4.1.8 - Exchange rates

A

A rise in the external value of one currency agasint another or a basket of currencies. Relates to a floating exchange rate system

86
Q

Big Mac index

4.1.8 - Exchange rates

A

The Big Mac index is a way of measuring Purchasing Power Parity (PPP) between different countries. By converting the average national Big Mac prices to US dollars the same goods can be informally compared. This can tell us something about whether a currency is under or overvalued in foreign exchange markets

87
Q

Clean float

4.1.8 - Exchange rates

A

A currency that floats according to market forces, free from government intervention

88
Q

Devaluation

4.1.8 - Exchange rates

A

When a country tries to devalue its currency to increase its price competitiveness in domestic and overseas markets. However, this often encourages other countries to also devalue leading to only temporary increases in the price competitiveness of exports

89
Q

Currency reserves

4.1.8 - Exchange rates

A

Money or other assets held by a central bank or other monetary authority so that it can pay if need be its liabilities (debts)

90
Q

Currency union

4.1.8 - Exchange rates

A

A group of countries (or regions) using a common currency - for example 19 countries that have entered the singel European currency (as of 2019)

91
Q

Depreciation of currency

4.1.8 - Exchange rates

A

A fall in the external value of one currency against another

92
Q

Devaluation of currency

4.1.8 - Exchange rates

A

A fall in the external value of a currency inside a fixed exchange rate system

93
Q

Fixed exchange rate

4.1.8 - Exchange rates

A

An exchange rate that is fixed agasint other major currencies through action by governments or central banks, usually within small margins of fluctuations around the central rate. Likely to involve periodic intervention in the foreign exchange market by one or more central banks to buy or sell the currency in question if it moves below or above its margins

94
Q

Floating exchange rate

4.1.8 - Exchange rates

A

A free-floating currency where the external value of a currency depends whollly on market forces of supply and demand. IMF classifies as free floating only those currencies where central bank interventions are limited to nore more than three instances in the preceding six months

95
Q

Foreign exchange reserves

4.1.8 - Exchange rates

A

The reserves of gold or foreign currencies (e.g. US dollars or Euros) typically held by central banks on behalfof their national government

96
Q

J Curve Effect

4.1.8 - Exchange rates

A

The effect of currency depreciation on the trade deficit depends on price elasticity of demand for exports & imports. The J Curve effect says a trade deficit can worsen after depreciation but improve in the medoum term if the Marshall-Lerner condition holds

97
Q

Managed floating currency

4.1.8 - Exchange rates

A

A floating exchange rate but subject to intervention by the monetary authorities, in order to resist fluctuations mthat they consider to be undesirable

98
Q

Marshall-Lener Condition

4.1.8 - Exchange rates

A

Marshall-Lerner condition predicts the circumstances in which a fall in the exchange rate improves the current account of the balance of payments. A devaluation of a currency improves the BoP only if the sum of price elasticities of demand for imports & exports are greater than one (Condition is that PedX + PedM > 1)

99
Q

Nominal exchange rate

4.1.8 - Exchange rates

A

The nominal exchange rate is the price of the domestic currency (say the UK pound) in another foreign currency (say US dollars), currently about US $1.30 or so. Thus to buy 1 UK poind you must spend 1.30 US dollars

100
Q

PPP Exchange Rate

4.1.8 - Exchange rates

A

The rate at which the currency of one country is converted into that of another to purchase the same amount of goods and services in each country

101
Q

Purchasing Power Parity (PPP)

4.1.8 - Exchange rates

A

The current exchange rate is adjusted so that a basket of goods and services can be bough for the same amount of dollars

102
Q
A
103
Q

Real exchange rate

4.1.8 - Exchange rates

A

The product of the nominal exchange rate (the dollar cost of euro, for example) and the ratio prices between the two countries

104
Q

Reserve currency

4.1.8 - Exchange rates

A

A foreign currency such as the US dollar ($) that is held in countries’ offical reserves because of its global importance as a medium of exchange and its inherant stability

105
Q

Revaluation of currency

4.1.8 - Exchange rates

A

An increase in the external value of a currency inside a fixed exchange rate system.

106
Q

Reverse J curve effect

4.1.8 - Exchange rates

A

When an appreciation of the exchange rate initially causes the current account or trade balance to improve

107
Q

Speculation

4.1.8 - Exchange rates

A

This is a risky action in which a person or organisation tries to predict what will happen to the price of an asset and buys/sells accordingly in order to try and make a profit. A speculator takes advantage of fluctuations in market prices

108
Q

Potential output

4.1.9 - International competitiveness

A

The economy’s maximum productive capacity in a phyisical sense. The larget output that could be produced, given the prevailing state of technology

109
Q

Potential productivity

4.1.9 - International competitiveness

A

Estimates of the productivity of the labour force i.e. output per peroson employed or the output per person hour. Improvements in productivity have an important effect on long run aggregate supply and trend growth

110
Q

Protectionism

4.1.9 - International competitiveness

A

Tariff and non-tariff restrictions on imports to protect domestic producers

111
Q

Relative export prices

4.1.9 - International competitiveness

A

A country’s export prices relative to those of a competing economy

112
Q

Relative unit labour costs

4.1.9 - International competitiveness

A

Labour costs per unit of output relative to those in other countries. Relative unit labour costs will rise when
1. A country’s exchange rate appreciates
2. Wage costs rise relatively faster than other nations
3. When labour productivity growth is relatively slower than in other economies

113
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A Level Economics (22 decks)

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