Global Economy 1& 2 Flashcards

Question

consumer surplus

Answer 1

the Toal benefit from consumption which is higher than the equilibrium price

Answer 2

limit on quantity of imports

Answer 3

no tax revenue no capacity for import after a quote has been filled leading to shortage

Answer 4

a subsidy to domestic production is when the government gives a grant to producers in ofer to increase supply consumers decrease imports as domestic goods increased

Answer 5

regulation makes importing challenging food standards regulation such as labels with a date

Answer 6

predatory prices (falling below AVC) on an international scale

Answer 7

1-dumping 2-protect domestic employment 3- protecting infant industries 4- health and safety

Answer 8

new industries which do not benefit from economies of scale and can't compete with established industries

Answer 9

do not benefit from the economies of scale cost of production is higher cant compete with established industry hence cant compete with countries with economies of scale subsides on restricting free trade allow industries to establish to the point where they operate at economies of scale

Answer 10

1. export price 2. unit labour cost 3. global competeivness index

Answer 11

a country is more competitive if their exports are cheaper and and are sold at a lower price than other competitors

Answer 12

total wage cost // total output

Answer 13

an Index which attempts to rate international competitiveness of different countries

Answer 14

if a country has low export prices foreign consumers are more likely to buy product making it more competitive

Answer 15

cost of producing a product in terms of the labour cost per unit

Answer 16

SRAS shifts right price level decreases more competition

Answer 17

A measure calculated by WEF each year price and quantity Factors: costs technology infrastructure health education this leads to index forms hence higher rankings- more competition

Answer 18

-E/R -Wage cost -Non wage cost -Supply side policies

Answer 19

ER depreciates imports increase and exports decrease Hence the UK becomes more internationally competitve

Answer 20

- increase in minimum wage - wages are a variable cost per hour

Answer 21

decrease in SRAS Price Level decreases competivness increases

Answer 22

decrease in efficiency greater cost of production decreased competition IE- tax regulation pensions contributes, increase in developed countries

Answer 23

lowering corporation tax increases SRAS- right lower production cost more competitive ____ lower healthcare spending lower health levels lower productivity higher production cost lower corp tax rev

Answer 24

imports and exports speculation relative IR Relative inflation FDI QE

Answer 25

less import= less S of currency ER strengthens

Answer 26

when investors predict a change in a currency hence they purchase and sell more now in advance - speculation of future appriciation - creates more demand now - hence appreciates ER

Answer 27

when the IR was higher in another country buy currency in currency for country with higher ER (hot money) increases in demand for that country E/R appreciates

Answer 28

higher inflation in one country will leads to less of a price increase of the equal production in another country as that productivity is more competitive demand increases export then increases currency demand increase currency appriciates hence low inflation rate leads to high inflation rate

Answer 29

increase is FDI increase in demand for a currency ER appreciates

Answer 30

Supply increases which causes a depreciation in the ER

Answer 31

growth and employment inflation rate FDI flows current accounts

Answer 32

Change in ER changes import/export distribution which from AD changes

Answer 33

increase in AD demand pull inflation _______________ SRAC decreases cost push inflation

Answer 34

cost push inflation inflation caused from increase in cost of imports

Answer 35

Cheaper FDI- FDI increases If speculation that the value of would decrease then no FDI

Answer 36

ER increases imports increase and ER current account decreases

Answer 37

In SR the impact on demand is inelastic contract have to be completed for example demand becomes more elastic in the long run

Answer 38

Long run: PED imports + PED exports >1 When this is met the country will exist in the long run Meaning marginal cost condition will be satisfied and inelastic to change in ER

Answer 39

lower growth lower inflation lower FDI flows

Answer 40

1- IR 2- Foreign currency transactions

Answer 41

increase in IR increased Hot Money ER appreciates

Answer 42

See currency increase in supply decrease in ER

Answer 43

when countries with similar and competing economies compete by devaluing their currency to increase the competivness of their exports This happened in China and Thailand

Answer 44

competitive devaluation to make exports more competitive

Answer 45

>50% inflatoin

Answer 46

hyperinflation economic contraction huge poverty

Answer 47

increase in price exports lower exports less demand ER depriciates

Answer 48

fixed managed floating

Answer 49

when ER is fixed to currency so a change in the ER is corrected by the central bank

Answer 50

changes in IR through foreign currency transactions

Answer 51

revalue a currency changed value- UK did this when MT was PM devalue is to decrease the value of a currency

Answer 52

govt manages ER between certain bonds

Answer 53

no govt intervention S/D determining gprices

Answer 54

-certain for investors - less speculation and volititility - revalue currency account deficit through competitive devaluation

Answer 55

monetary policy can be used for AD and inflation rather than a currency prevents a currency from being over valued self correcting ER

Answer 56

Nominal ER Real ER

Answer 57

price of one currency in terms of another

Answer 58

how much a currency is worth relative to price of goods and services in another country

Answer 59

Nominal ER x Domestic PL /// Foreign PL

Answer 60

when country is more productive at producing multiple goods

Answer 61

lowest opportunity cost to increase production

Answer 62

1- work out opportunity cost, use PPF, divide and find who has comparative advantage 2- this increases world output 3- specialisation

Answer 63

world output increases

Answer 64

- production is constant - no trade barriers - transport costs

Answer 65

1. diseconomies of scale which could lead to AC increasing 2. trade barriers could disrupt competitive advantage

Answer 66

increase in world output increase in world GDP increase in living standards

Answer 67

incraease in productivity decrease in LRAC

Answer 68

overdepenance on imports and exports not diversifies economy if anyone producers certain goods more overdependent and unknown

Answer 69

lower production cost increased specialisation could lead to diseconomies of scale

Answer 70

a group of countries which have a market agreement to have low trade barriers between each other which are fixed

Answer 71

trade within the trading block is likely to increase

Answer 72

free trade areas customs unions common market monetary union

Answer 73

an area where there is a free trade between countries and each country has the right to set individual trade barriers

Answer 74

UNITED STATES CANADA MEXICO AGREEMENT Free trade in NR countries free trade area

Answer 75

EU is 27 countries like a free trade union but there is a homogeneous external tariff on non member products 10% tariff from cars coming from outside the EU

Answer 76

like a customs union but FOP can move freely between member countries this is in place EU common market (31 countries)

Answer 77

like a customs union but a common currency is showed between members Eurozone has 20 members

Answer 78

AS production may be cheaper now with no tariff members less likely to import a good from a country outside the free trade area

Answer 79

trade can be diverted from low cost producers to higher cost producers (a country may have had a more favourable trade deal before it entered a common market or it could just be a lower cost now because of shipping)