International Economic Policy Flashcards
How can globalisation affect national economies?
interdep countries affected by : economic health + policies of other countries
How can an increase in tax rates affect the economy of a trading partner?
↑ taxes => ↓ purchasing power + ↓ consumption of domestically produces goods + ↓ consumption of imported good
=> ↓ exports + ↓ output + ↓ unemployment in the other country
What does the international trade multiplier refer to?
Changes in imports into one country A
-> Impact on country B national income
= International trade multiplier
What is the G7?
Intergovernmental organisation, created in 1975
Deals with :
Macroeconomic management
International trade
Relations w/ the developing countries
What are the G7 countries?
France, West Germany, Italy, Japan, UK, US, Canada
Which country joined the G7 in 1998?
Russia at the Birmingham Summit (G8)
Why has Russia’s G8 membership been suspended?
A joint statement “the Russian Federation’s clear violation of the sovereignty and territorial integrity of Ukraine”
How often do G7/G8 summits take place?
Annual meeting to foster consensus/cooperation on global issues :
o Economic growth
o Crisis management A
What is the G20?
It was Created in 1999 in Berlin, 20 members
What are the G20 countries?
G7 + EU, Argentina, Australia, Indonesia, Mexico, Saudi Arabia, South Korea, Turkey, The BRICS
What is the G20’s mission?
Promotes : Growth and Economic development at a global level
What does the international harmonisation of economic policies imply?
coordinate macroeconomic policies in order to achieve common goals
What does the convergence of economies imply?
countries reach similar levels of :
o Growth
o Inflation
o Interest rates
o Budget deficits
o Balance of payments (exports - imports)
What does EMU stand for?
European economic and Monetary Union
What does EMU imply?
Implies complete economic and financial interdependence of the EU countries
What is the ERM? What is its objective?
Exchange Rate Mechanism.
o Stabilise exchange rates
o Help Europe become an area of monetary stability, before euro
Which countries were not ERM members when the Euro was introduced in 1999?
Only UK and Sweden weren’t members
What organisation was the predecessor of the European Central Bank?
European Monetary Institute (EMI)
What are the five convergence criteria that a country has to fulfil to join the EU?
o Inflation : not exceed the average inflation rate of the 3 members w/ the lowest rates by more than 1.5%
o Interest rates : should not exceed the average of the 3 members w/ the lowest rates by more than 2%
o General government debt <60% GDP
o Budget deficit <3% GDP
o Exchange rates within ERM bands
What countries did not join the currency union in 1999? Why?
o Denmark and UK : “opt-out” : they are in the criteria but decided not to join
o Sweden and Greece : didn’t fulfil the criteria.
According to its supporters, what are the advantages of the single currency?
Elimination of costs of converting currencies
Increased competition + efficiency
Elimination of exchange rate uncertainty
Lower inflation and rates
What is a Eurosceptic?
Loss of national economy and political sovereignty
According to its opponents, what are the disadvantages of the single currency?
- Lack of national currencies
- Limited adjustments in government spending
- Asymmetric shocks
What does the verb depreciate mean?
Diminish in value over a period of time.
What does the Stability and Growth Pact prevent?
Prevents countries in the EU from spending beyond their means.
What is an asymmetric shock?
