Economics Theme 4 Flashcards
What factors have contributed to globalisation?
Transport and infrastructure
Communicationn and technology
Trade liberalisation
Businesses increasingly operate across borders
International financial markets
What are the impacts of globalisation?
7 Answers
Increased interdependence of economies
Increased living standards
Decrease in current global superpowers
Greater consumer choice
Lower prices
worker explotation
Environmental damage
What are the advantages of globalisation?
Increased competition
Greater economies of scae
Increased capital flows and inward investment
Free movement of resources
Increased trade and specialisation
What are the diadvantages of glboalisation
Increased numbers and power of MNC’s
Free movement of resources leads to a brain drain
global monopolies and monopsonies
Use of scare resources and greenhouse gases
Loss of cultural independence
Regulation and tax avoidance
Interdependency
What are the assumptions made with a comparative advantage?
No economies of scale
to transport costs
perfect knpowledge
free mobility of resources
environmental degradation is ignored
What are the advantages of specialisation and trade?
Lower prices
more consumer choice
larger markets
economies of scale
increased living standards
5 Answers
What are the disadvantages of specialisation and trade?
5 Answers
trade deficit
dumping
contagion
global monoploies
problems facing emerging and developing economies
How do you calculate terms of trade?
Terms of trade = index of export prices/ index of import prices x 100
What factors influence a country’s terms of trade?
relative inflation rates
relative productivity
exchange rates
What is a tradig bloc?
A set of countries who have an agreement on the level of trade restrictions set between eachother
What is the order of trading blocs from least to most integrated
Free trade area
customs union
common market
monetary union
economic union
What is trade creation?
When different countries enter into a business arangement or when a country trades internationally
What is trade diversion?
When trade is directed away from the most efficient trading prtners and towards less efficient ones, usually due to trade barriers and trading blocs
What are the restrictions of free trade?
Empployment
self sufficiency
Balance the balance of payments
retaliation
prevent dumping
reduces competition
what are the impacts of protectionist polices on consumers
Cheaper and more competitive goods are prevented from entering the market
Less choice
Higher price
What is a tariff?
Taxes that foreign firms need to pay in order to sell in the country
What is a quota
taxes imposed on imported goods, quotas are a restrictionn or limit on how many goods and services an economy can import.
What are the components of the balance of payments?
Balance of trade
Current account deficit
Current account surplus
income
Current account deficit
current account surplus
current transfers
What are the three accounts
The current account
The capital accounts
The financial accounts
What causes the current account to experience deficits or surpluses?
Value of the country’s currency
Rate of inflation
Economic growth from imports
Non price factors (quality and design)
What are the measures to reduce current account defficits?
Expenditure reduction
Expenditure switching
Supply side polices
What are the 3 styles of exchange rates?
Floating
Fixed
Managed
What does appreciation mean?
When a country’s currency increases in value
What does revaluation mean?
When a country’s central bank decides to increase the value of its currency
