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Econmics Year 2 Topic 2 Flashcards

1
Q

Globalisation

A

The ever-increasing integration of the movement of the factors of production across Nations

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2
Q

Terms of trade

A

Index of export prices
———————————X 100
Index of import prices

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3
Q

Absaulte advantage

A

If a country can produce a product or service using less resources then another country

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4
Q

Comparative advantage

A

If a country can produce a good or service at a lower opportunity cost then another country

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5
Q

Factor endowment

A

Lot of good quality factors of production

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6
Q

Transfer pricing

A

Reducing taxes on profits by selling goods at a low price internally from a high tax country to another part of the company in a low tax country

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7
Q

Causes of globalisation

A

trade liberalisation, multinational companies and communications, IT and trade blocs

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8
Q

Impact of globalisation on
Consumers

A

Consumer choice, pricing and income

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9
Q

Impact of globalisation on
Workers

A

Employment and unemployment, migration and wages

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10
Q

Impact of globalisation on producers

A

Specialisation, costs and markets and tax avoidance,

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11
Q

Benefits of trade

A

Specialisation,EOS,
choice,
Innovation

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12
Q

Costs of trade

A

Overdependence, jobs, risk, distribution of income, environment, loss of culture

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13
Q

Trading blocs (order)

A

Preferential trade areas
Free trade areas
Customs union
Common markets
Economic union/monetary union

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14
Q

Common market

A

-same product standerds
-free moment of factors of production
-common external tarrif

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15
Q

Customs union

A

-free trade in products
-common external tarrif

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16
Q

Economic union

A

-fully interested economically
-combined fiscal & monetary union

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17
Q

Fiscal union

A

-central body has some power over gov borrowing,spending and uniform tax rates

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18
Q

Free trade area

A

-free trade in goods and services
-own tarrif

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19
Q

Monetary union

A

-same currency

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20
Q

Multilateral or Pluto lateral trade agreement

A

-trade agreement between three or more contrys

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21
Q

Preferential trading area

A

-trade liberalisation

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22
Q

Trade bloc

A

A group of country’s that have signed an agreement to reduce or abolish protectionist barriers between themselves

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23
Q

Trade creation

A

It become beneficial to buy a good or service within the trade bloc rather then outside it

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24
Q

Trade diversion

A

Goods from outside the trade bloc are diverted by a common external tarrif

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25
Restrictions on free trade
Tariffs,quotas,subsides, administrative barriers (product standerds)
26
Reasons for restriction on trade (justifying protectionist policy’s)
Job protection, dumping, cheap Labour
27
Measures of competitiveness
-relative unit labour costs (Total wages/total output) -relative export prices (Uk exported goods compared to main partners in index)
28
Factors influencing international competitiveness
-exchange rates -productivity -wage and non wage costs (Company pension or taxes) -regulation -quality -research and development -taxation
29
Benefits of international competitive
-Currant account surplus -FDI -employment -Economic growth -wage growth -domestic purchasing power
30
Non tariff barriers
-subsides -rules,regulations and red tape -voluntary export agreement -government procurement of domestic goods -delays at ports and airports
31
Justifying restrictions on imports
-Protecting infant industry’s -protecting sunset industry’s -job protection -dumping -cheap Labour -defence purposes
32
Protecting infant industry
New industry’s face higher costs then established foreign competition
33
Dumping
Selling products below cost of production (predatory pricing)
34
Protecting sunset industry’s
Likely to suffer from structural unemployment due to lack of transferable skills
35
Reasons for capital flows: (BOP)
-speculator -capital flows for trade -banks lending across borders -individuals transferring funds -FDI
36
Bilateral exchange rate
The rate of exchange of one single currency for another single currency
37
Effective exchange rate
Measure of the exchange rate of a country’s currency, usually against a basket of currencies of a contrys major trading partners
38
Reasons why foreign exchange is brought and sold?
-international trade in good and services needs to be financed -long term capital movements occur (Inward investment and outward spending) -this is an enormous amount of speculation in the foreign exchange markets
39
Purchasing power parity Theory of exchange rates
States that exchange rates in the long term change in line with inflation rates between economies
40
Fixed rate
The exchange rate is fixed to another currency (Kroon to euro)
41
Peg
Short term exchange rate is fixed but allowed slow long term movements
42
Managed
A combination of fixed and float. Largely decided by market forces
43
Managed float
Determined by supply and demand increases exchange rate
44
Depreciation of a currency
When the value of currency falls because of free market forces or government intervention
45
Devaluation of a currency
When a government or central bank officially fixes a new lower exchange rate for currantcy
46
Exchange rate
The value of one currency expressed in terms of another currency
47
Gold standard
An exchange rate where the value of the currency was fixed against the weight of gold
48
Foreign exchange markets
Trading arrangements where currencies are bought and sold
49
Revaluation of a currency
When a government or central bank officially fixes a higher exchange rate for a currency
50
Appreciation of a currency
When the value of a currency rises beacuse of free market forces or government intervention
51
Marshall Lerner condition
The combined eleaticitys of demand for imports and exports must be greater then one for a fall in the value of currency to improve BOP
52
Expenditure reducing
In BOP, government policy’s to reduce the level of AD in order to reduce imports and boost exports
53
Expenditure switching
I’m BOP, government polices such as devaluation or protectionism to reduce domestic buying and boost exports
54
A debt-restructuring agreement (BOP imbalance)
Where those owning debt agree to write down the value of the money they owe. E.g £2 for every £10 they owe. Causes high interest rates
55
Progressive tax
% of tax paid increases as income increases
56
Regressive tax
% of tax paid decreases as income increases
57
Proportional tax
% of tax paid stays constant as income increases or decreases
58
HDI
Human development index -literacy rate or years of school -life expectancy -GNI per capita
59
Dutch curse
-sells lots of natural gas -currency goes up due to demand and supply falls -rest of economy struggles as the only thing they export is gas
60
Harrod domar -savings gap
-investment, savings and technology change are linked -investment relies on savings (Banks) -no savings = savings gap
61
Overcoming lack of savings
-foreign aid for political gain
62
Absolute poverty
Individuals do not have the resources to be able to consume necessities to survive
63
Relative poverty
Poverty that is relative to the existing living standerds for the average indervidual
64
Forms of foregin aid?
-Grants -loans -tied aid
65
Gini coefficient
-statistical measure of inequality of income, it’s value ranges from 0, where there is perfect equality of income to 1 where it is highly unequal
66
Trickle down effect
The argument that income cascades down the chain of supply
67
Micro finance
Refers to loans, savings, insurance and transfers
68
Purposes of taxes:
-pay for G -correct market failure -manage AD -redistribution of income
69
Shadow banking
-more banking done in less regulated markets
70
Systematic risk
Danger of whole banking system collapsing
71
Central banks roles
Regulate financial system to avoid systematic risk
72
Financial market
Where buyers and sellers trade monetary services or assets
73
Purposes of financial markets
-to provide services demanded by households, firms and government -speculation and financial l gain
74
Roles of financial markets
-savings -lending -exchange of goods and services -insurance
75
Types of financial institutions
-investment bank -retail bank-consumers -commercial bank-firms
76
Scalping
Small profits on small price changes through a day
77
Financial market failure (Asymmetric information)
-financial institutions have more knowledge then consumers -PPI for non needed products E.g toaster
78
Financial market failure (Market rigging)
-when a group of individuals collude to fix prices to lead to gains at the expense of others -Elon musk tweeting about Tesla so he could buy up shares
79
Financial market failure (Externalities)
-these costs are taken on by firms,consumers and the government but not the financial market -Uk gov bailed out banks -cost uk tax payer loads
80
Types of development strategy -market orientated
-trade liberalisation -promotion of FDI -privatisation
81
Negatives of subsides
-subsides can be corrupt -can be difficult to remove -if subsidy is bought by everyone it benefits the rich who don’t need it
82
Types of development strategy -interventionist
-lnfrastructure development -tourism -Lewis model -development of primary industry’s
83
Roles of forward market
-access to defferd payments for currency’s
84
Equity
- fair distribution of income
85
Equality
-equal distribution of income
86
Automatic stabilisers
-progressive income tax system -benefits
87
Crowding out
-government increase spending, increasing AD which leads to hight inflation and interest rates -reducing private sector investment
88
Crowding in
The theory that suggests that an increase in government spending can lead to increase in private investment
89
Intrested rates right now? (Monetary)
4.5% -and Quantitive tightening
90
Budget deficit
6.1% GDP -2023 116 Billion on debt interest alone -more then public services other then NHS
91
Income tax and corporation tax right now? (Fiscal)
-Income tax has been frozen -corporation tax 19%-25%
92
Fiscal drag
Incomes rise with inflation but income tax bracket doesn’t
93
SR changes in TOT
-demand/supply of exports/imports -relative inflation rates -exchange rate movements
94
LR changes in the TOT
-income -technology -productivity
95
Structural trade deficit
-supply side issues such as low productivity, investment or high unit labour costs
96
Cyclical deficit
Part of the fiscal deficit which is caused by government spending and taxes changing through trade cycle
97
Structural deficit
Part of a fiscal deficit that exists even when the cyclical deficit is zero at the top of a boom

Econmics (5 decks)

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