International Economics Flashcards
What’s globalisation?
The integration of the world’s local, regional and national economies into a single international market.
What factors contribute to globalisation?
Improvements in transport infrastructure and operations. Improvements in IT and communication.
Trade liberalisation.
International financial markets.
Multinational Corporations.
What are the impacts of globalisation on consumers?
More choice.
Lower prices if companies take advantage of comparative advantage.
Higher prices if incomes rise lead to an increase in demand.
Potential loss of culture.
What are the impacts of globalisation on workers?
Employment and wages can increase/decrease based on the comparative advantage of different countries.
Increased migration.
Increasing inequality.
Potential for poor working conditions.
What are the impacts of globalisation for producers?
Can source products from more countries which reduces risk.
Lower costs.
Potential for greater revenue.
Uncompetitive firms may lose out.
What are the impacts of globalisation for governments?
Can receive higher tax revenue from large MNCs and their employees.
Can receive less tax revenue.
MNCs have the power to bride and lobby governments.
What are the pros of globalisation?
Improved allocation of resources.
Free trade.
Inward investment.
Specialisation.
What are the pros of MNCs in globalisation?
Capital inflows and inward investment.
Economies of scale.
Increased employment opportunities.
Infrastructure.
Diversification.
Better standards.
What are the cons of globalisation?
Increased inequality.
Environmental impacts.
Structural unemployment.
Movement of labour.
Damage to traditional cultures.
What are the cons of MNCs in globalisation?
Profit motive.
Negative impacts on small firms.
Environmental impact.
Exploitation of labour and resources.
Tax avoidance.
What’s international trade?
The exchange of goods and services between countries.
What’s free trade?
Where there are no restrictions on the flow of goods and services between countries. There’s no government intervention.
What’s absolute advantage?
When a country can produce a good or service more cheaply than another country.
What’s comparative advantage?
When a country can produce a good or service at a lower opportunity cost than another country. The theory of comparative advantage states that countries should specialise where they have a comparative advantage and then trade with other countries.
What assumptions are made when discussing comparative advantage?
There’s no transport cost.
Costs are constants and there’s no economies of scale.
Goods are homogenous.
Factors of production are perfectly mobile.
There’s no terms of trade between countries.
What’s specialisation?
The process of focusing on a specific task or area of production.
What are the advantages of specialisation and trade?
Can increase world output.
Countries can benefit from economies of scale.
Greater choice for consumers.
Greater competition.
What are the disadvantages of specialisation and trade?
Can lead to over-dependance.
Can cause structural unemployment.
Environmental damages.
Countries may experience a loss of sovereignty.
Potential loss of culture.
What factors influence the pattern of trade?
Comparative advantage.
Emerging economies.
Trading blocs and bilateral trading agreements.
Relative exchange rates.
What’s protectionism?
When a country takes action to protect its own industry or jobs by restricting trade with other countries. This could also be done by joining a customs union
What are the reasons for trade restrictions?
To help establish an infant industry.
To protect domestic employment.
To prevent potential dumping.
To restrict imports of products with externalities.
To improve current account deficit on balance of payments.
What are the types of restrictions on free trade?
Tariffs.
Quotas.
Subsidies.
Embargoes.
Non-tariff barriers.
What’s a tariff?
Taxes placed on imported goods. E.g, the EU have a tariff of 10% on cars.
What’s a quota?
A physical limit on the volume of imports.
