Globalisation Flashcards
Globalisation
Globalisation: increasing integration and interconnectedness between the countries of the world.
Containerisation
Containerisation: the use of uniform-sized containers for transportation of goods, which significantly reduces the cost of transportation.
Outsourcing
Outsourcing: part of a firm’s production is performed by another firm (or in the case of offshoring, the work is done by a firm in another country).
Less developed economies
Less developed economies: economies with low income per capita and less development in terms of human capital and infrastructure.
Multinational corporations
Multinational corporations (MNCs): businesses that operate in at least two countries (also known as TNCs — transnational corporations).
Absolute advantage
Absolute advantage: a country has an absolute advantage in the production of a product if it can be produced for a lower cost than in another country.
Comparative advantage
Comparative advantage: a country has a comparative advantage in the production of a product if it can be produced at a lower opportunity cost than in
another country.
Protectionism
Protectionism: implementing policies that will protect an economy through restrictions on imports.
Tariff
Tariff: a tax on imported goods and services.
Quota
Quota: a restriction on the number of a particular kind of import into an economy.
Infant industry:
Infant industry: a small, developing industry which cannot yet benefit from economies of scale (and this may justify protection).
Dumping
Dumping: where a low-cost producer ‘dumps’ large quantities of a product onto another country’s market below cost price — often leading to the closure of local firms which cannot compete with the low-cost producer.
Free trade area
Free trade area: trade without barriers, such as tariffs, between two or more countries.
Customs union
Customs union: a free trade area between two or more countries with a common external tariff applied to all outside countries.
Common market
Common market: a customs union that has other forms of economic integration, such as free movement of factors of production between members, or harmonisation of laws and product standards.
Balance of payments
Balance of payments: a record of all the financial transactions taking place between the UK and any other country.
1 Capital account.
2 Financial account
3 Current account.
The capital account
The capital account is a minor component of the balance of payments and includes capital transfers as well as purchases and sales of some non-financial assets.
The financial account
measures the flows of financial capital into and out of the country.
Primary income
Primary income: flows of income from investments abroad less flows of income from foreign investments located in the UK.
Secondary income
Secondary income: transfers of money received in the UK from abroad less transfers of money paid by the UK overseas.
Foreign direct investment (FDI):
Foreign direct investment (FDI): the buying of productive assets located outside the country of ownership.
Portfolio investment:
Portfolio investment: refers to the buying of financial assets located outside the country of ownership.
Short-term speculative capital:
Short-term speculative capital: money which can be moved immediately between currencies to maximise its return (also known as ‘hot money’).
Expenditure reducing policies:
Expenditure reducing policies: policies to improve the current account balance by reducing spending in the economy.
- deflationary policies
Expenditure switching policies:
Expenditure switching policies: policies to encourage a switch away from imports and to encourage a growth in exports.
- protectionist policies and devaluation
Devaluation:
Devaluation: a sudden and significant fall in the value of the exchange rate.
Marshall–Lerner condition:
Marshall–Lerner condition: the requirement that devaluation will improve the current account balance only if the total of the price elasticities for imports and exports is greater than 1.
Floating exchange rate:
Floating exchange rate: one where the government makes no attempt to influence the value of the currency.
Open market operations:
Open market operations: direct intervention into the foreign currency market to influence the demand for and supply of that currency.
Fixed exchange rate:
Fixed exchange rate: where the government intervenes in the foreign exchange market to stabilise a currency’s value against one or more other currencies.
Eurozone:
Eurozone: those countries using the euro as their currency.
currency union
Currency union: a group of countries which share a common currency.
Economic growth
Economic growth refers to the increase in the level of national income over time, measured in either actual or potential terms
Development
multidimensional concept and is believed to depend on a number of criteria being achieved, such as:
* income — which will come from economic growth
* availability of basic goods and services for survival — food, shelter, warmth and so on
* freedom of individuals to make choices on a social and an economic level
