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Economics > Globalisation & Trade > Flashcards

Globalisation & Trade Flashcards

1
Q

What is globalisation?

A

The economic integration of different countries through increasing freedoms in the cross-border movement of people, goods, services, and finance

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2
Q

What are the 3 main characteristics of globalisation?

A
  1. Increasing foreign ownership of companies
  2. Free trade in goods and services
  3. Increasing movement of labour, capital, and technology across borders
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3
Q

What was the value of trade in 2000 and in 2020?

A

2000 - $6.45 trillion
2020 - $19 trillion

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4
Q

Which 5 factors contributed to globalisation in the last 50 years?

A
  1. Containerisation and resulting economies of scale
  2. Improvements of communications technology (e.g. social media)
  3. Rapid growth in the number and influence of transnational corporations
  4. The end of the Cold War
  5. Deregulation of financial markets in the 1990s
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5
Q

What are 6 benefits of globalisation?

A
  1. Increased capital and labour mobility
  2. Lower prices
  3. Reduction in absolute poverty
  4. Rising incomes
  5. Rising education levels
  6. Increased economies of scale
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6
Q

What are 7 costs of globalisation?

A
  1. Structural unemployment from shifting sectors
  2. Monopoly power of multinationals
  3. Rapid depletion of natural resources
  4. Increase in global warming
  5. Loss of sovereignty and culture
  6. Rising inequality
  7. Easier tax avoidance
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7
Q

What is comparative advantage?

A

The theory that a country should specialise in the goods/services it can produce at the lowest opportunity cost

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8
Q

What is absolute advantage?

A

Where a country is able to produce a product using fewer factors of production than another country

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9
Q

What are the 4 assumptions of comparative advantage?

A
  1. Zero transport costs
  2. Perfect knowledge
  3. Easily achieved factor substitution
  4. Constant costs of production
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10
Q

What are the 4 main limitations of comparative advantage?

A
  1. Over-dependence on other countries
  2. Environmental damage not considered
  3. Uneven distribution of income
  4. Structural unemployment from shut-down industries
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11
Q

What are the 6 main advantages of international trade?

A
  1. Lower prices
  2. Greater variety of goods/services
  3. Higher quality products
  4. Economies of scale
  5. Higher economic growth
  6. Improved living standards
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12
Q

What are the 7 main drawbacks to international trade?

A

1.Global monopolies
2. Exposure to external shocks
3. Structural unemployment
4. Over-specialisation in developing economies
5. Loss of sovereignty and culture
6. Leakages from the circular flow of income
7. Weakened domestic industries

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13
Q

Which 4 factors influence the patterns of trade?

A
  1. Comparative advantage
  2. Impact of emerging economies
  3. Trade blocs and bilateral agreements
  4. Changes in relative exchange rates
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14
Q

What are the terms of trade?

A

The ratio of a country’s average export price to its average import price

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15
Q

What is the formula for terms of trade

A

(Index of average export prices / index of average import prices) x 100

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15
Q

What are the 2 causes of improvements in the terms of trade?

A
  1. Higher export prices
  2. Lower import prices
16
Q

Which 3 factors influence the terms of trade?

A
  1. Relative inflation rates
  2. Relative interest rates
  3. Changes in exchange rates
16
Q

What are the 5 main impacts of changes in terms of trade?

A
  1. Changes to the current account balance
  2. Changes to GDP
  3. Changes to unemployment levels
  4. Changes to international competitiveness
  5. Changes to living standards
17
Q

What are the 2 causes of deteriorations in the terms of trade?

A
  1. Lower export prices
  2. Higher import prices
18
Q

What are the 4 types of trading blocs?

A
  1. Free trade areas
  2. Customs unions
  3. Common markets
  4. Monetary unions
19
Q

What is the defining trait of a single market?

A

Free movement of factors of production

20
Q

What are the 2 features of a customs union?

A
  1. Tariff-free trade
  2. Common tariff rates on external imports
21
Q

What are the 3 essential conditions for the establishment of a successful monetary union?

A
  1. Free movement of labour and finance
  2. Similar trade cycles
  3. Automatic fiscal transfers
22
Q
A
23
Q

What are 4 disadvantages of regional trade areas?

A
  1. Trade diversion (production of goods transferred to a country with comparative advantage)
  2. Structural unemployment in some industries
  3. Lost ability to set monetary policy
  4. Loss of sovereignty
24
Q

What are the 2 main roles of the WTO in trade liberalisation?

A
  1. Encourages countries to reduce protectionism
  2. Adjudicates in trade disputes
25
Q

What are 4 reasons for protectionism?

A
  1. Protect infant, dying, and strategic industries
  2. Protection from dumping
  3. Prevent structural unemployment
  4. Reduce current account deficit
26
Q

What are the 4 types of protectionism?

A
  1. Tariffs
  2. Quotas
  3. Subsidies to domestic producers
  4. Regulation
27
Q

What are the 5 effects of tariffs?

A
  1. Increased producer surplus
  2. Decreased consumer surplus
  3. Increased tax revenue
  4. Worsened living standards
  5. Increased equality
28
Q

What are the 4 effects of quotas?

A
  1. Increased revenue and output for domestic producers
  2. Decreased output for foreign producers
  3. Higher prices and less choice
  4. Reduced purchasing power and living standards
29
Q

What are the 4 effects of subsidies?

A
  1. Increased international competitiveness for domestic producers
  2. Lower prices
  3. Costs the government
  4. Improved living standards
30
Q

Which 3 accounts make up the balance of payments?

A
  1. The current account
  2. The financial account
  3. The capital account
31
Q

What are the 3 components of the current account?

A
  1. Trade in goods
  2. Trade in services
  3. Transfers
32
Q

What are the 3 components of the financial account?

A
  1. FDI
  2. Portfolio investment
  3. Assets
33
Q

What are the 4 main causes of current account deficits?

A
  1. Government borrowing
  2. Relatively high currency value
  3. Relatively high inflation rate
  4. Rapid economic growth
34
Q

Which 3 types of measures could be used to reduce current account imbalances?

A
  1. Expenditure-switching policies
  2. Expenditure-reducing policies
  3. Supply-side policies
35
Q

What are the 2 main measures of international competitiveness?

A
  1. Relative unit labour costs
  2. Relative export prices
36
Q

What are the 3 main factors affecting international competitiveness?

A
  1. Relative unit labour costs
  2. Relative inflation rate
  3. Relative level of regulation
37
Q

What are the 5 benefits of high international competitiveness?

A
  1. Export-led growth
  2. Decreased unemployment
  3. Current account surplus
  4. Increased overseas FDI
  5. Improved standards of living

Economics (12 decks)

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