International Economics Flashcards
What is globalisation?
Globalisation is the process of interaction and integration among people, companies, and government worldwide.
- aspects to globalisation include economic, cultural, and political
Why does globalisation cause world economy becoming a single economy
As it increases the interdependence of economies around the globe.
What is interdependence?
Interdependence is the dependence of two or more things on each other.
What are the advantages of globalisation
- brands develop globally
- labour has been divided between several companies (greater employment)
- increased migration
- countries become more interdependent (performance of their country depends on another)
- more countries involved in global trade E.g. China, India
What are the factors contributing to globalisation (last 50 yrs)?
- economic and political transitions
- global (transnational) companies
- trade liberalism
- communications technology
- containerisation (transport)
What is bilateral, consensus, multilateral, orthodoxy?
Bilateral: involving two parties (especially countries)
Consensus: a general agreement
Multilateral: involving several parties, especially countries
Orthodoxy: authorised or general accepted theory, doctrine, or practice
What is trade liberalism?
The removal (reduction) of restrictions on the free exchange of goods and services between nations
What is a comparative advantage?
A comparative advantage is when a country produces a good/ service for a lower opportunity cost than other countries
What is high-end?
The superior quality or sophistication and usually high in price
Define industrialisation.
The development of industries in a country or region on a wide scale.
What is factor endowment?
The amount of land, labour, capital and entrepreneurship that a country possess and can exploit for production
What is mutually?
Mutually is felt or done by two or more people or groups in the same way
What is product differentiation?
The process of distinguishing a product or service from others, to make it more attractive to a target
What is copious?
Abundant in supply of quantity
What are the three main reasons why countries trade with each other?
- different factor endowments ( may have good/service insufficient in supply)
- Price (may be cheaper buying from overseas)
- product differentiation (may not have a product/ service)
What is specialisation?
Specialisation occurs when a firm, individual, region or country focuses its labour and production on a limited range of goods/ services
Why is specialisation beneficial?
- improvement in productivity as repetition of tasks allows the workers to become more efficient at it, making fewer mistakes
- allows firms to increase quality and quantity goods/services
- decreases the production costs as more produced given the same time
- fewer costs allows the firms to reduce prices
how is trade and specialisation related?
- specialisation allows a firm to become more beneficial and have a comparative advantage compared to other firms , making them more attractive for trade
What is absolute advantage?
- absolute advantage is when a country can produce more of a good/service using equal amounts of resources
- both countries are capable of producing two goods
What is comparative advantage?
Comparative advantage is when a country produces a good/services at a lower opportunity cost than another country
What are the advantages of specialisation & trade
- greater world output, gain in economic welfare
- there is an outward shift in the PPF curve
- lower average costs
- consumers have greater variety of goods/ services
What are the disadvantages of specialisation & trade
- less developed countries might use non-renewable resources (might run out)
- there could be structural unemployment
What are the disadvantages of globalisation?
- growing inequality
- higher structural unemployment
- environmental costs
- trade imbalances
- greater risk of external shocks
- less cultural diversity
What is a footloose company?
Companies which choose to relocate themselves to reduce production costs
