Economics Theme 4

Question 1

What factors have contributed to globalisation?

Answer 1

Transport and infrastructure
Communicationn and technology
Trade liberalisation
Businesses increasingly operate across borders
International financial markets

Question 2

What are the impacts of globalisation?
7 Answers

Answer 2

Increased interdependence of economies
Increased living standards
Decrease in current global superpowers
Greater consumer choice
Lower prices
worker explotation
Environmental damage

Question 3

What are the advantages of globalisation?

Answer 3

Increased competition
Greater economies of scae
Increased capital flows and inward investment
Free movement of resources
Increased trade and specialisation

Question 4

What are the diadvantages of glboalisation

Answer 4

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

Question 5

What are the assumptions made with a comparative advantage?

Answer 5

No economies of scale
to transport costs
perfect knpowledge
free mobility of resources
environmental degradation is ignored

Question 6

What are the advantages of specialisation and trade?

Answer 6

Lower prices
more consumer choice
larger markets
economies of scale
increased living standards

5 Answers

Question 7

What are the disadvantages of specialisation and trade?

5 Answers

Answer 7

trade deficit
dumping
contagion
global monoploies
problems facing emerging and developing economies

Question 8

How do you calculate terms of trade?

Answer 8

Terms of trade = index of export prices/ index of import prices x 100

Question 9

What factors influence a country’s terms of trade?

Answer 9

relative inflation rates
relative productivity
exchange rates

Question 10

What is a tradig bloc?

Answer 10

A set of countries who have an agreement on the level of trade restrictions set between eachother

Question 11

What is the order of trading blocs from least to most integrated

Answer 11

Free trade area
customs union
common market
monetary union
economic union

Question 12

What is trade creation?

Answer 12

When different countries enter into a business arangement or when a country trades internationally

Question 13

What is trade diversion?

Answer 13

When trade is directed away from the most efficient trading prtners and towards less efficient ones, usually due to trade barriers and trading blocs

Question 14

What are the restrictions of free trade?

Answer 14

Empployment
self sufficiency
Balance the balance of payments
retaliation
prevent dumping
reduces competition

Question 15

what are the impacts of protectionist polices on consumers

Answer 15

Cheaper and more competitive goods are prevented from entering the market
Less choice
Higher price

Question 16

What is a tariff?

Answer 16

Taxes that foreign firms need to pay in order to sell in the country

Question 17

What is a quota

Answer 17

taxes imposed on imported goods, quotas are a restrictionn or limit on how many goods and services an economy can import.

Question 18

What are the components of the balance of payments?

Answer 18

Balance of trade
Current account deficit
Current account surplus
income
Current account deficit
current account surplus
current transfers

Question 19

What are the three accounts

Answer 19

The current account
The capital accounts
The financial accounts

Question 20

What causes the current account to experience deficits or surpluses?

Answer 20

Value of the country’s currency
Rate of inflation
Economic growth from imports
Non price factors (quality and design)

Question 21

What are the measures to reduce current account defficits?

Answer 21

Expenditure reduction
Expenditure switching
Supply side polices

Question 22

What are the 3 styles of exchange rates?

Answer 22

Floating
Fixed
Managed

Question 23

What does appreciation mean?

Answer 23

When a country’s currency increases in value

Question 24

What does revaluation mean?

Answer 24

When a country’s central bank decides to increase the value of its currency

Question 25

What does depreciation mean?

Answer 25

When a country’s currency falls in value

Question 26

What does devaluation mean?

Answer 26

when a country’s centrail bank decides to decrease the value of its currency

Question 27

What factors influence a floating exchange rate

Answer 27

Relative interest rates
Relative inflation rates
the levels of iports and exports
speculation
quantitative easing

Question 28

What does speculation mean?

Answer 28

The act of trading on anticipated price movements which causes the price movement to happen as they either demand more or less of a currency

Question 29

What is the Marshall Lerner Condition

Answer 29

When the sum of PED of Exports and PED of Imports = 1 or more

Question 30

What is the J curve affect?

Answer 30

Where the current account deficit will worsen before it improves due to inflexibilities and adjustent time lags. It is important to also know that the J curve effect will only be accurate if the Marshall Lerner Condition is also being met.