4.1 International Economics Flashcards
(33 cards)
1
Q
Definition of globalisation?
A
The increasing international interdependence amongst economies over a period of time
2
Q
Characteristics of globalisation?
A
- increased international trade
- advances in information and communication technology
- rise of TNC’s
- increased cultural exchange
- interconnected financial markets
- global supply chains
- increased standardisation
3
Q
Factors contributing to globalisation?
A
- technological advances
- trade liberalisation
- economic liberalisation
- transport infrastructure
- financial integration
- TNC’s
- political stability
4
Q
Impact of globalisation on individual countries?
A
- stimulate economic growth by increasing trade and FDI
- can exacerbate income inequality since benefits may not be even,y distributed
5
Q
Impact of globalisation on consumers?
A
- more choice
- lower prices
- loss of culture
=> could lead to higher prices if incomes rise and demand pull inflation
6
Q
Impact of globalisation on workers?
A
- surge of jobs in manufacturing sectors in developing countries, loss in other countries
- increased migration could lower wages, but could increase AD due to their skills and increase job opportunities
- int. competition could reduce wages/growth for low skilled workers in developed countries
- wages for high skilled workers increasing, since greater demand, exacerbate income inequality
- TNC’s provide training and new jobs
7
Q
Impact of globalisation on producers?
A
- reduced risk since firms have multiple sources and bigger consumer base
- can exploit comparative advantage
- can employ cheaper low skilled labour from developing countries
- firms who cannot compete will lose out
8
Q
Impact of globalisation on the government?
A
- higher taxes since TNC’s pay tax and workers
=> tax avoidance? - corruption through TNC bribery and lobbying
- reduced control over economies
- government action may be required for climate change and financial stability
9
Q
Impact of globalisation on the environment?
A
- increased demand for raw materials, bad for environment
- more emissions
- technological advances could help
10
Q
Globalisation x economic growth? [IMPORTANT]
A
- increases investment, injection, multiplier = more impact, incentive for countries to make supply side improvements to keep TNC’s
- TNC’s can bring technology and techniques which have knock on benefits to all industries
- increased output, help BoP, exploitation of comparative advantage
11
Q
Globalisation + micro synoptic point?
A
- externalities
- impacts on consumers and producers
- increases contestability of markets
12
Q
Theory of comparative advantage?
A
- countries find specialisation mutually advantageous if the OC of production are different
13
Q
Absolute advantage?
A
When a country can produce a good more cheaply in absolute terms than another country
14
Q
Comparative advantage?
A
When a country is able to produce a good more cheaply relative to other goods produced
15
Q
Assumptions/limitations of comparative advantage theory?
A
- assumes no transport costs
- constant costs
- no economies of scale
- homogenous goods
- perfectly mobile factors of production (i.e. no tariffs or barriers, perfect knowledge)
- trade depends on the terms of trade between countries
- long-term focus
16
Q
Advantages of specialisation
A
- world output increases, increases global economic growth
- economies of scale, reduces prices globally
- greater choice for consumers
- greater competition = incentive to innovate, consumer welfare
17
Q
Disadvantages of specialisation?
A
- over-dependence on particular exports/imports can compromise nations control over economy and make it more vulnerable to disruptions
- can cause structural unemployment if industries lose to foreign firms (depends on who mobile the workforce is)
- environment will suffer
- loss of culture
- income inequality?
18
Q
Factors impacting pattern of trade?
A
- comparative advantage
- emerging economies
- trading blocs and bilateral trading agreements
- relative exchange rates
19
Q
How does comparative advantage impact pattern of trade?
A
- increase in exports of manufacturing goods from developing countries to developed countries since they have achieved advantage in production due to lower labour costs
- deindustrialisation means manufacturing has shifted to other countries i.e. from UK to China
- industrialisation of China and a India while UK focuses on services
20
Q
What are emerging economies?
A
Countries that are in the process of rapid deindustrialisation and experiencing significant economics growth i.e. China, India, Brazil
21
Q
Impact of emerging economies on pattern of trade?
A
- increased their share of world exports
- become important importers of goods (energy, minerals, food)
- domestic businesses can expand into developed countries (China’s Lenovo, Huawei)
- allows emerging economies to stop relying on primary products, building long-term economic resilience
- reduces developing markets dependence on the West
22
Q
A
23
Q
What are trading blocs?
A
Group of countries that form agreements to trade amongst themselves
24
Q
What are bilateral trade agreements?
A
- agreements between two countries to facilitate trade
25
Impact of trade blocs and bilateral trade agreements on pattern of trade?
- increased trade amongst trade blocs
- preferential trading between specific countries, boosting certain sectors
- such as EU, BRICS
26
What are exchange rates?
Determine the value of one country’s currency in terms of another’s
27
Impact of exchange rates on pattern of trade?
- depreciation = cheaper, more competitive exports
28
What are terms of trade?
Measures the rate of exchange of one product for another when two countries trade
- tells quantity of exports needed to be sold in order to purchase a given level of imports
29
Good/bad terms of trade?
Tot increase = favourable since country can buy more imports with same level of exports, called an improvement
Tot decrease = unfavourable, can be when export prices fall or import prices rise, called a deterioration
30
How to calculate the terms of trade?
(average export price index/average import price index) x 100
31
Factors influencing a country’s terms of trade?
- export/import prices
- anything that impacts prices (exchange rates, inflation, demand/supply rates) in the short run
- long run, productivity levels and changing incomes
32
Prebisch-Singer hypothesis x terms of trade?
Hypothesis suggests long run price of primary goods declines in proportion to manufactured goods, so those dependent on primary exports will see a fall in their terms of trade
33
Impacts of changes of terms of trade?
- if PED of exports and imports are inelastic, improvement in terms of trade would improve current account
- if PED of exports and imports are elastic, improvement will worsen currenct account
- improvement will lead to fall in GDP since exports will fall or imports will rise
- long term decline in terms of trade indicates long term decline in SoL since less imports can be bought
