Definitions Flashcards
Globalisation
Process by which the worlds economies are becoming increasingly economically interdependent
What is necessary for globalisation to occur ?
Improvements in technology , especially in transport and communication’s
Example of globalised firms
Apple
Nestle
Starbucks
The terms of trade
Ratio of country export prices to import prices
If index export prices increases while index of imports remains same
Country can buy more imports for given quantity of exports and their terms of trade are said to have improved
The world trade organisation (WTO)
International body whose purpose is to promote free trade by pursuing member nations to remove trade barriers such as tarrifs
MEDcs
More economically developed countries
NICs
Newly industrialised countries
Closed economy
Economy that does not take part in the international trade
Open economy
An economy that participates in international trade
Free trade
A situation in which there are no trade barriers
Absaloute advantage
When a country can produce at a lower cost than another country due to being more technically/productively efficient
Comparative advantage
When a country can produce a good at a lower opportunity cost than another country
Tarrifs
Indirect tax in imports
Export subsidies
Given to industries producing goods for exports to improve there international competitiveness
Embargoes
Ban on trade with a specific country
Trade creation
When country moves from buying from a high cost country to a low cost country
E.g a country joining and buying more from the EU as goods are no longer subject to tarrifs
Trade diversion
Country moves from buying from a low cost producer to a high cost producer
Buying from EU because previous cheap sources are now subject to tarrifs
How does customs union lead to trade creation ?
Access to cheap imports
How does customs unions lead to trade diversion ?
No longer as cheap goods
Purchasing power parity
How much output a given amount of currency buys compared to other counties assuming equal living costs
Problems of P.P.P
Quality of products varies
Different consumption patterns between countries
Not everything is formally traded and has a price
Variable quality of economic data gathering
Self sufficiency alibi Ty to produce all gods and services required within an economy without international trade
Self sufficiency ability to produce all goods and services required within an economy without international trade
International aid
Money , goods and services , ‘soft’ loans given by one country to help another country
