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Business - Theme 4 > 4.1.5 Trading Blocs > Flashcards

4.1.5 Trading Blocs Flashcards

1
Q

What is a trading bloc?

A

A trading bloc is a group of countries that sign up to free trade between them, protected by a tariff wall against imports from outside.

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2
Q

What are features of a free trade area?

A
  • no tarrifs between members
  • no external tariff
  • can negotiate own trade deals
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3
Q

What are features of a customs union?

A
  • no tariffs
  • no border checks
  • common external tariff
  • trade deals for whole customs union
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4
Q

What are features of a single market?

A
  • no tariffs
  • common external tariffs
  • freedom of movement goods and people
  • common rules and regulations
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5
Q

What do trade blocs work towards?

A
  • harmonisation of laws

- free movement of labour

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6
Q

What is dumping?

A

Dumping describes the practice of selling off excess products in a foreign market at an exceptionally low price, which destroys sales for local producers

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7
Q

Why would countries want to join a trading bloc?

A
  • Harmonisation of laws which allows countries to benefit from economies of scale
  • Countries working together have greater power globally to stand up to non-member practices e.g. dumping
  • Competing in a larger home market incentivises international trading and efficiency
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8
Q

What are some examples of the world’s trading blocs?

A 
EU
ASEAN
MERCOSUR
NAFTA
EAC
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9
Q

EU

  • when did it start?
  • who are the main members?
  • what is the total GDP?
  • what are some distinctive features?
  • what is the population?
A
  • 1958
  • Germany, France and UK (28 currently, 27 after Brexit)
  • $16,000 billion
  • have introduced a singular currency (euro)
  • 515 million (445 million post-Brexit)
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10
Q

ASEAN

  • when did it start?
  • who are the main members?
  • what is the total GDP?
  • what is the population?
A
  • 1967
  • Indonesia, Thailand, Vietnam (10 in total)
  • $2,600 billion
  • 625 million
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11
Q

NAFTA

  • when did it start?
  • who are the main members?
  • what is the total GDP?
  • what are some distinctive features?
  • what is the population?
A
  • 1994
  • USA, Canada, Uruguay (3 in total)
  • $21,000 billion
  • large labour force, low-cost manufacturing
  • 480 million
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12
Q

What are the advantages of trading blocs?

A

+ free movement of goods between members gives the potential to create a large single market ie. EU
+ External tariff walls insulate the business from competition from another part of the world
+ As trade grows between neighbours, it becomes economic governments to provide appropriate infrastructure e.g global trade therefore, global infrastructure

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13
Q

What are the drawbacks of trading blocs?

A
  • competition increases due to freer trade, so those with monopoly power may find it ‘competed away’
  • to create a single market, new rules and regulations may be agreed, including wage rates
  • the availability of easily accessed neighbouring markets may reduce enterprise in relation to distant but dynamic ones such as China
  • within a geographically proximate bloc, there may be a common factors that together becomes problems e.g. low commodity prices
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14
Q

What is the criteria to join the EU?

A

1) Democratic society that values human rights
2) A free market economy that is stable and able to compare in the single-market efficiency
3) Agree or by-in to the aims and having the capacity to adhere to implement laws

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15
Q

What are the benefits of BREXIT?

A
  • membership fees
  • establish British sovereignty
  • helps solve immigration issues
  • stop bureaucracy and red tape
  • establish own regulations and rules
  • encourage domestic spending
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16
Q

What are the drawbacks of BREXIT?

A
  • less international trade
  • less free movement of labour or capital
  • border issues e.g. Northern Ireland
  • create labour shortages
  • products have to adhere to a standard
  • uncertainty
  • depreciation of sterling
17
Q

What is the purpose of the European monetary union?

A
  • share common currency
  • conditions countries have to fulfil to join
  • ECB controls policies that are shared
  • removes exchange rates
  • keep inflation low
18
Q

What is the ECB?

A

European central bank that keeps inflation 2%

19
Q

What are the government policies

A

1) Fiscal policy

2) Monetary policy

20
Q

What are fiscal policies?

A

taxation and government spending to influence aggregate demand

21
Q

What type of fiscal policies are used during a boom?

A

Contractionary policies that increase tax and reduce government spending helping reduce inflation.

22
Q

What type of fiscal policies are used during a recession?

A

Expansionary policies that reduce taxes, increase government spending which help grows customer spending

23
Q

What are the types of fiscal policies?

A

Contractionary and expansionary policies

24
Q

What are monetary policies?

A

These are policies that influence the supply of money in circulation and interest rates.

25
Q

What is aggregate demand?

A

The demand for final goods and services in an economy.

26
Q

What happens to interest rates during a boom?

A

they increase and consequently spending decreases and saving increases

27
Q

What is quantitative easing?

A

A form of monetary policy, when a government prints more money

28
Q

What is quantitative easing bad?

A
  • devalue the currency

- poor long-term

29
Q

What is the convergence criteria?

A

Things required to enter the EU

  • inflation rates
  • exchange rate stability
  • public debt
  • price stability
  • natural budget deficit
30
Q

What are the positives of the EMU?

A
  • Adopts a common currency allowing ease of business
  • no exchange rates
  • stability
  • price transparency
31
Q

What are the negatives of the EMU?

A
  • Determine policies across 28 countries
  • Loss of sovereignty
  • admin costs
32
Q

How many countries use the euro?

A

19

33
Q

What are the forms of monetary policies?

A

quantitative easing

limit lending between banks

Business - Theme 4 (16 decks)

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