Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > 5. Globalisation and Trade > Flashcards

5. Globalisation and Trade Flashcards

1
Q

Who came up with the theory of comparative advantage?

A

David Ricardo

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is comparative advantage?

A

A country has lower opportunity costs when deciding to specialise in a good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are some criticisms of comparative advantage?

A

Assumes constant returns to scale, assumes perfect knowledge, transport costs distort PPF, rate of inflation is ignored, goods are assumed to be homogenous (non-price competitiveness is ignored, assumes factors of production are perfectly mobile (and no trade barriers)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What happens to comparative advantage if relative inflation is high?

A

Comparative advantage is eroded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is globalisation?

A

Process by which national economies have become increasingly integrated and interdependent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the world’s most globalised country 2022?

A

Switzerland

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What caused high globalisation up until 2008?

A

communication advancements, transport advancements (containerisation), formation of multi-lateral organisations (IMF), differences in relative quality of factors of production, business growth incentives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

From 2007/8 the world entered a period of deglobalisation… why?

A

Western nations suffering from secular stagnation,slowing pace of liberalisation (cutting import tarrifs have already happened), non-tarrif barriers have grown, rising prosperity (large GDp % spent on services rather than manufactured products), technological improvements within countries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the benefits of specialisation and trade?

A

Increase in total world output (theory of comparative advantage), increased exports - higher AD leads to growth (multiplier and accelerator effects), provides revenues and jobs in exporting firms, increased imports - goods of better quality and lower cost, higher consumer surplus, competition for domestic firms drives efficiency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are some evaluation points for specialisation and trade?

A

assumes factors of production are perfectly mobile, over-specialisation = vulnerability to international shocks, increased imports- infant industries close down leading to structural unemployment. ‘Dumping’ of goods on the world market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is a countries terms of trade?

A

ratio of the price index for exports of goods and services to the ratio for imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How to calculate terms of trade?

A

export price/ import price x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a trade of terms improvement?

A

export prices rise relative to import prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is it called when import prices rise relative to export prices?

A

terms of trade deterioration

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How does high relative inflation affect terms of trade?

A

export prices are rising faster than import prices hence ToT improvement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is economic integration?

A

countries coordinate to reduce trade barriers and potentially harmonise monetary and fiscal policy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is a preferential trading area?

A

countries reduce tariffs/ quotas but only on certain goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a free trade area?

A

all trade barriers are eliminated, but free to trade how they like with external countries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is an example of a preferential trading area?

A

India and Pakistan

20
Q

What is an example of a free trade area?

A

ASEAN

21
Q

Why was the ASEAN free trade area created in 1992?

A

The ASEAN Free Trade Area eliminate tariff barriers among the Southeast Asian countries with a view to integrating the ASEAN economies into a single production base and creating a regional market of 500 million people.

22
Q

What is the economic size of the ASEAN free trade area?

A

$2.3 trillion

23
Q

What is a customs union?

A

free trade within the trading bloc and common external tariffs on goods imported from outside the bloc

24
Q

What is the most famous example of a customs union?

A

The European Union

25
Q

What are common markets?

A

free trade within the trading bloc and common external tariffs on goods imported from outside the bloc
additionally the four freedoms - capital, people, goods and services.
product standards and laws are common between all nations

26
Q

What is an example of a common market?

A

the EU single market

27
Q

What is a monetary union?

A

free trade within the trading bloc and common external tariffs on goods imported from outside the bloc
additionally the four freedoms - capital, people, goods and services.
product standards and laws are common between all nations
same central bank and same currency

28
Q

What is an example of a monetary union?

A

the eurozone

29
Q

What are the six stages of economic intergration?

A

PTA, FTA, customs union, common market, monetary union, full economic intergration

30
Q

What is the main advantage of a monetary union?

A

stability - currency is more stable against fluctuation, lack of volatility of exchange rate, increased international trade as a result

31
Q

What is the main disadvantage of a monetary union?

A

lack of monetary policy autonomy

32
Q

What are the main causes of globalisation?

A

1) Technological advancements (containerisation)
2) TNC and global corporation power
3) Liberalisation as an ideology

33
Q

What is a pattern of trade?

A

Mix of goods and services that a country imports/ exports

34
Q

What are two key changes in global patterns of trade?

A

The G7 world share in manufacturing has fallen dramatically.
Flows with emerging economies have increased significantly

35
Q

How are patterns of trade discussed?

A

Geographical - gravity theory (tend to trade with closest partners)
Commodity (types of products traded)

36
Q

What is vertical specialisation?

A

Specialisation in particular stages of production - unbalanced gains from trade

37
Q

What are the dynamic gains from free trade?

A

Diffusion of knowledge and technology, economies of scale, increased competition access to cheaper inputs

38
Q

What are the benefits to a monetary union?

A

Reduction in exchange rate uncertainty, increased FDI, elimination of

39
Q

What is an optimal currency area?

A

Geopolitical area over which a unified currency acts providing the best economies of scale to a currency and effectiveness of policy to promote growth and stability

40
Q

Why is there potential conflict between trade blocs and the WTO?

A

Trade blocs can lead to trade diversion - diverging from the aim of promoting fair competition

41
Q

Why do trade blocs support the role of the WTO?

A

They lead to trade creation (through specialisation/ reduced transactionsl costs etc)

42
Q

Why might countries enlist protectionist measures?

A

Protection of infant industries, protect domestic employment, retaliation, self-sufficiency, retaliation, dumpling protect strategic industries

43
Q

What are quotas?

A

A physical limit on the quantity of imports (no tax revenue is raised and shortages are created)

44
Q

What is an example of the infant industry arguement from Bad Samaritans?

A

Rise of Toyota a very successful Japanese car industry - heavy protectionism banned ford and General Motors and lead to a Toyota bailout

45
Q

What is Friedmans Golden Straitjacket?

A
46
Q

What is international competitiveness?

A

The ability of a country to sell its goods and services abroad - determined by price and or quality of the service

47
Q

What are the factors that influence international competitiveness?

A

Relative unit labour costs (dependent on productivity), wages and non wage costs relative to competitors, rate of inflation relative to competitors, regulation relative to competitors

Economics (27 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions