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economics > 4.2.6 international economics > Flashcards

4.2.6 international economics Flashcards

1
Q

state 5 causes of globalisation

A

containerisation
technological advances
tax system differences
removal of capital controls
trade liberalisation

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2
Q

explain how containerisation causes globalisation

A

containerisation is freight transport for sea shipping
it has decreased shipping costs making trade easier

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3
Q

explain how technological advances causes globalisation

A

improvements in communication makes the world more interconnected
makes business and thus trade easier

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4
Q

explain how tax system differences causes globalisation

A

countries may decrease corporation tax to attract inflows of FDI

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5
Q

explain how removal of capital controls causes globalisation

A

leads to international financial flows between countries
can make investment or trade easier

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6
Q

explain how trade liberalisation causes globalisation

A

WTO advocates for liberalisation which has contributed to the decline in trade barriers, promoting trade

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7
Q

state the key characteristics of globalisation (5)

A

increased fdi across borders
deeper specialisation of labour
global supply chains
high levels of labour migration
reduced trade barrietrs

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8
Q

define globalisation

A

the growing interdependence of countries and the rapid rate of change it brings about

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9
Q

define less developed economies

A

countries considered behind based on their economy, capital, infrastructure, etc

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10
Q

negative impacts of globalisation on less developed economies (4)

A

low paid workers in sweatshops
dominance of usa corporate culture (cocacolonisation)
brain drain to the more developed economies
overreliance on global markets will increase vulnerability to shocks

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11
Q

positive impacts of globalisation on less developed economies (4)

A

promotes trade, export led growth
transfers of tech or knowledge from devloped economies
developmental aid
more access to goods and services increasing standard of living

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12
Q

define developed economies

A

high economic development, high gdp per capita, high standard of living and high investment

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13
Q

negative impacts of globalisation on developed economies (4)

A

tax avoidance from mnc’s
structural unemployment due to specialisation
environmental degradation
competition, low prices, low profit, less investment

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14
Q

positive impacts of globalisation on developed economies (3)

A

economic growth from exports
more production leads economies of scale
migration to fill skills gap

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15
Q

what is a mnc

A

a mnc is a business that operates in several countries

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16
Q

an example of mnc

A

microsoft

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17
Q

how have mnc used division of labour

A

mc’s have built global supply chains by taking advantage of the global division of labour, increasing economic integration and thus globalisation

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18
Q

how have mnc’s used long term investment

A

mnc’s have undertaken lt investment flows which have seen technology transferred from developed economies to ldc’s helping to shift economic power and increasing economic integrate

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19
Q

how have mnc’s impacted employment

A

manufacturing has shifted to emerging economies in south east asia (due to cheap labour) which has resulted in structural unemployment in north america and europe however it has created jobs for china and india which has reduced absolute poverty

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20
Q

what is absolute advantage

A

the country can produce more of a good than other countries from the same resources

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21
Q

what may make complete specialisation not beneficial

A

if transport costs exceed the increase in output

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22
Q

what is comparative advantage

A

country with the lowest oppurtunity cost when producing the good
most productiveky efficient

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23
Q

how would you calculate the oppurtunity cost of Y when producing one more X

A

y/x of y

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24
Q

what is the difference between absolute advantage and comparative advantage

A

absolute is where you can produce more whereas comparative is at a lower oppurtunity cost

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25
Q

assumptions of comparative advantage (4)

A

factors of production are fixed and immobile between countries but perfectly mobile between industries
constant returns to scale
demand and cost conditions are stable
no barriers to trade

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26
Q

benefits of trade (5)

A

specilaisation increases efficiency
job creation H/E structural unemployment
peace creating less economic friction
choice for consumers
dynamic efficiency as competition drives innovation

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27
Q

define patterns of trade

A

the way in which goods and services are traded between countries

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28
Q

state 4 factors impacting the pattern of trade

A

comparative advantage
emerging economies
trading blocs
exchange rates

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29
Q

explain how comparative advantage influences the pattern of trade

A

countries will trade if they or another country has a comparative advantage
for example extreme whether conditions may impact the comparative advantage of a country with a large agricultural sector which will impact their pattern of trade

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30
Q

explain how emerging economies influences the pattern of trade

A

countries grow at different rates so their will be differences in their pattern of trade
more growth, more imports (eg machinery to develop)
AND more exports to finance the imports
EG: China imported a lot of capital when they were emerging and are now in a trade surplus

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31
Q

explain how trading blocs influences the pattern of trade

A

trading blocs increase trade within the bloc
however decreases with non members
eg EU members trade a lot with members but not a lot with non members eg Australia

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32
Q

explain how exchange rates influences the pattern of trade

A

ER affects the prices of goods between countries which massuvely impacts imporrts and thus impacts pattern of trade

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33
Q

prodcutive efficiency

A

prdocuing for lowest cost

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34
Q

allocative efficiency

A

distributing resources according to consumer preference P=MC

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35
Q

what is a tariff

A

a tax on imports allowed into the country

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36
Q

what is a quota

A

a restriction on the number of imports allowed into a country

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37
Q

what is an export subsidy

A

payments to domestic producers to reduce costs and thus increase competitiveness

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38
Q

3 strengths of tariff

A

more domestic supply increases employment
better CA balance
prevents dumping

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39
Q

2 weaknesses of tariff

A

deadweight loss
loss of efficiency

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40
Q

4 causes of protectionism

A

response to allegations of export dumping
reposnse to peristent large trade deficit
employment protection
raise tax revenues to help with fiscal balance

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41
Q

what is dumping

A

exporting a product at a price lower in the foreign market than in the exporters domestic market
EG China dumping steel

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42
Q

what is an infant industry

A

new industry struggling to compete
EG 19th century steel

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43
Q

what is a sunset industry

A

industry in decline
EG UK shipbuilding

44
Q

5 disadvantages of protectionism

A

loss of allocative/productive efficiency
retaliation, trade war, less growth, decreased SoL
high prices has a regressive impact
higher costs decreases competitiveness
increased barriers for domestic firms

45
Q

3 advantages of protectionism

A

higher domestic wages due to less low cost labour
less structural unemployment in infant/sunset
less competition, high prices, high profits- more invetsment and higher wages

46
Q

what is a customs union

A

a free trade area with a common external barrier

47
Q

example of a customs union

A

EU customs union

47
Q

what can customs union lead to (2)

A

trade creation
trade diversion

47
Q

what is trade creation

A

when consumption shifts from a high cost producer to a low cost producer
leads to an efficiency gain and lower prices for consumer

48
Q

eg of trade creation

A

WINE- uk joining the EU, Italy/france

48
Q

what is trade diversion

A

where consumption shifts from a low cost producer to a high cost producer

49
Q

eg of trade diversion

A

FOOD- uk bought food from USA, joined EU

49
Q

what is a single market

A

eliminate all barriers between each other and harmonize rules and regulations
goods services capital and labour can move freely across national borders

49
Q

when and how was the eu established

A

established via the maastricht treaty in 1993

50
Q

what is the largest single market

A

THE EU!!

51
Q

gdp of eu single market

A

13 trillion euros
#wtf

52
Q

what is the eu currency and how many members use it

A

euro
20 members

53
Q

what is the free travel area in the eu and how many members

A

schegen area
26 members

54
Q

5 benefits of the eu single market

A

import tariff free access to a single market of 500 mill people
easy access to eu fdi
access to eu structural funds
access to eu capital markets, makes borrowing easier
more competition , innovation

55
Q

richest eu country

A

germany

56
Q

poorest eu country

A

malta

57
Q

when was the wto established

A

1995

58
Q

what came before the wto

A

General Agreement of Tariff and Trade

59
Q

role of wto

A

make sure other countries follow their trade agreements and solve trade disagreements through negoitiation

60
Q

example of legal sanction

A

emabargo on russia after ukraine war from eu

61
Q

conflicts of the wto

A

regional agreements contradict wto principles
wto strives to ensure non members can trade freeky and easily with bloc members

62
Q

3 accounts of balance of payments

A

current account
capital account
financial account

63
Q

4 sections of current account

A

trade in goods
trade in services
net primary income/investment incomr
net secondary income/current transfers

64
Q

eg of net primary income

A

dividends

65
Q

eg of net secondary income

A

foreign aid
remitances

66
Q

2 sections of capital account

A

capital transfers
non produced transactions

67
Q

eg of capital transfers

A

migrant transfers of assetts

68
Q

4 sections of the financial account

A

direct investment
portfolio investment
other investments
reserve assetts

69
Q

eg of non produced assetts

A

patents

70
Q

eg of direct investment

A

FDI

71
Q

eg of portfolio investment

A

bonds

72
Q

eg of other investments

A

loan s

73
Q

what is a current account deficit

A

value of countries exported goods and services, investment inflows and transfer inflows are less than the value of imported goods and services, investment income outflows and outward transfers

74
Q

what is a current account surplus

A

value of countries exported goods and services, investment inflows and transfer inflows are more than the value of imported goods and services, investment income outflows and outward transfers

75
Q

4 causes of CA deficit (structural)

A

underinvestment
inadequate r and d
low productivity
low cost competition

76
Q

5 causes of CA deficit (cyclical)

A

overvalued exchange rate
boom in domestic demand
recession in key export market
slump in global export prices
increased demand for imported technology

77
Q

benefits of investment flows between countries (4)

A

increased trend growth, increased per capita income, less absolute poverty
investment in physical productive capacity will increase the size of capital stock, which will increase productivity
increased productivity, more competitive, more exports, increased AD
FDI can create jobs and reduce unemployment

78
Q

consequences of investment flows between countries (3)

A

MNCs may take advatage of weak environemntal laws
MNCs have been criticised for poor working conditions
profits often go to shareholders in host countr (outflow from circular flow)

79
Q

policies to correct a CA deficit (5)

A

contractionary fiscal/monetary to reduce AD
devaluation of the pound
subsidise businesses to increase exports
supply side policies
protectionism

80
Q

explain the marshall lerner condition when DEVALUEING TO REDUCE CA DEFICIT

A

PED for exports and imports combined must exceed 1
currency devalued, demand is inelastic due to a time lag and consumers not reacting immediately
as the prices have increased but demand hasn’t this will first worsen the CA deficit
however consumers will then react to the price changes and demand will be elastic, decreasing the CA deficit

81
Q

what is the difference between expenditure switching and expenditure reducing policies

A

expenditure reducing aim to reduce ad and reduce overall spending, eg contractionary monetary policy
expenditure switching policies aim to switch spending towards domestic firms, eg protectionism

82
Q

policies to reduce CA deficit impact on UNEMPLOYMENT

A

less demand, “labour is derived demand”, unemployment

83
Q

policies to reduce CA deficit impact on INFLATION

A

less spending, less demand pull inflation
increased productivity, less demand pull

protectionism could lead to commodities being more expesnive, cost push inflation

84
Q

policies to reduce CA deficit impact on fiscal balance

A

spending on export subsidies, worsen
import tariffs, better
more domestic businesses, more corp tax income
less demand, less income, less income tax

85
Q

disadvantages of CA deficit (4)

A

fall in AD as (X-M) is negative
downward pressure on exchange rate
reflects supply side weakness
loss of output and employment

86
Q

advantages of CA defict (3)

A

cyclical causes reflect booming demand
can be financed by other accounts
CA surplus could lead to friction (eg USA-China)

87
Q

evaluation of CA deficit (4)

A

can it be financed
size
persistence
if capital is imported it can lead to future surplus (eg China)

88
Q

define exchange rate

A

the price of one currency in terms of another
external value of the currency

89
Q

how are floating exchange rates determined

A

by demand and supply

90
Q

where is the value of the currency determined

A

in the FOREX market

91
Q

in a floating exchange rate what is it called when currency gets stronger/weaker

A

appreciate/depreciate

92
Q

in a flixed exchange rate what is it called when currency gets stronger/weaker

A

revalue/devalue

93
Q

who demands pounds

A

foreigners

94
Q

who supplies pounds

A

domestic citizens (eg gov consumers bank producers)

95
Q

factors influencing demand for £ (increase)

A

interest rates increase
low corp tax leading to FDI
more exports due to export subsidy
speculation
tourism (eg olympics)
low domestic inflation
good macro performance

96
Q

factors influencing supply of £ (increase)

A

removal of tariffs, increasing imports
bad macro performance domestically
fall in interest rates
better corp tax abroad (ourtwards investment)
speculation
QE
increased IR overseas

97
Q

impact on £ if uk inflation rises

A

increased supply as uk citizens want to import cheaper goods and so will sell their pounds
dcreased demand as uk exports are less competitive
therefore £ dpereciates

98
Q

impact of currency depreciation oninflation

A

increased import prices, increased cost of production, increasd prices, inflation (cost push),

99
Q

impact of currency depreciation on economic growth

A

less imports more exports leading to increased AD
H/E dependent on PED

100
Q

impact of currency depreciation on unemployment

A

increased exports so more deomestic production meaning more jobs

101
Q
A

economics (9 decks)

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