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macroeconomics > Pack 7: International economies pt1 > Flashcards

Pack 7: International economies pt1 Flashcards

1
Q

What is globalisation?

A

The increasing internationalisation of trade and ever-increasing integration of the world’s local, regional and national economies into a single interdependent global market.

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2
Q

What are the characteristics of globalisation?

A

~Increased International trade and interdependence
~Increased FDI and movement of capital

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3
Q

What is a transnational company?

A

Commercial enterprise that operates substantial facilities or does business in more than one country.

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4
Q

What factors contribute to globalisation?

A

~Transport improvements
~Communication improvements
~Lowering of trade barriers
~Growth of trading blocs
~Capital mobility + opening up of markets
~Economic development + rising real incomes
~Increased importance of Transnational companies

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5
Q

Benefits of globalisation for individual countries?

A

~Up output, growth and employment
~Down absolute poverty
~Lower inflation rates

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6
Q

Costs of globalisation for individual countries?

A

~Increased inequality
~Job/industry losses
~Greater risk

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7
Q

Benefits of globalisation to governments?

A

~Up economic prosperity + political benefits
~Improved budget balance

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8
Q

Costs of globalisation for governments?

A

~Tax avoidance
~Potential political costs

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9
Q

Benefits of globalisation to workers?

A

~Employment by global companies
~Up wages + living standards

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10
Q

Costs of globalisation for workers?

A

~potential job losses
~Downward pressure on wages

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11
Q

Benefits of globalisation to producers?

A

~Larger market
~Lower production costs
~Tax avoidance + transfer pricing

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12
Q

Costs of globalisation for producers?

A

~Up risk and interdependence
~Diseconomies of scale
~Greater competition
~Anti-globalisation backlash

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13
Q

Benefits of globalisation for consumers?

A

~Increased choice
~Lower prices

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14
Q

Costs of globalisation for consumers?

A

~Issue of homogenisation
~Higher prices by global companies

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15
Q

Benefits of globalisation to the environment?

A

~Development of renewable energy

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16
Q

Costs of globalisation to the environment?

A

~Transportation of goods
~Increased good/service production
~Strain on environment + scarce resources

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17
Q

How is transfer pricing regulated?

A

Arm’s length principle - Price agreed in a transaction between two related parties must be the same price that is agreed between two unrelated parties.

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18
Q

What are the limits of this regulation of transfer pricing?

A

~Room for interpretation
~No control of other forms of tax avoidance

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19
Q

Limits to controlling global companies?

A

~Issues for developing countries
~Balance between attracting and controlling companies
~Global nature of companies

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20
Q

What is specialisation?

A

System of organisation where economic units, such as firms or nations are not self-sufficient but concentrate on producing certain goods and services in which they have an advantage, trading the surplus with others.

21
Q

What is international trade?

A

Exchange of goods and services across international borders

22
Q

What are the assumptions of the international trade model?

A

~Only two countries
~No transport costs
~No economies of scale
~Homogeneous goods
~Factors of production + perfectly mobile
~Perfect knowledge
~No tariffs and quotas

23
Q

What is an absolute advantage?

A

Ability of a country to produce greater quantity of a good/service with the same quantity of inputs, per unit time

24
Q

What is a comparative advantage?

A

Economy’s ability to produce a particular good/service at a lower opportunity cost than trading partners

25
Q

Limitations of comparative advantage?

A

~High transport costs + external costs ignored
~Labour immobility + unemployment
~Diseconomies of scale

26
Q

Advantages of specialisation and trade?

A

~Comparative advantage
~Export-led growth + improvement to trade balance
~Larger market
~Competition +Efficiency
~Lower inflation

27
Q

Disadvantages of specialisation and trade?

A

~Higher risk
~Vulnerable to external shocks
~Job losses + foreign competition
~Environmental damage
~ Higher inequality within + between countries

28
Q

What is the Pattern of Trade?

A

What goods and services a country trades, with whom, and in what direction

29
Q

What factors influence the Pattern of Trade?

A

~Comparative advantage
~Impact of emerging economies
~Up trading blocs + bilateral trade deals
~Changes in relative exchange rates

30
Q

What are the Terms of Trade?

A

The ratio of export prices to import prices

31
Q

What improves the terms of trade?

A

When the value increases such as when export prices rise relative to import prices.

32
Q

What factors influence the Terms of Trade?

A

short-term:
~Exchange rate
~Inflation
~demand for exports/imports
long-term:
~Productivity changes
~Income changes

33
Q

What is the impact of changes in the Terms of Trade?

A

~Living standards
~Competitiveness + balance of payments
~Growth + employment

34
Q

What is free trade?

A

International trade conducted without the existence of barriers to trade, e.g. tariffs and quotas

35
Q

What is protectionism?

A

Use of economic policies to regulate trade between countries, mainly to reduce imports.

36
Q

Reasons for trade restriction?

A

~Infant industry argument
~job protectionism
~Protect against dumping
~Correct balance of payments problem
~Cheap labour
~Strategic/self-sufficiency reasons
~Limits over-specialisation
~Retaliation

37
Q

What are tariffs (customs/import duty)?

A

Tax on imported goods which has the effect of raising domestic import price and thus reducing demand

38
Q

What are the effects of tariffs?

A

~Domestic supply up
~Domestic price up
~Domestic demand down
~Imports + import revenue down
~Government gain tariff revenue

39
Q

What are quotas?

A

Physical limit on quantity of imports into country

40
Q

Effects of quotas?

A

Same as tariffs but no revenue for the government and risks of shortages

41
Q

What are subsidies on domestic producers?

A

Grant given by government, to firms, within country in order to reduce production costs, increase supply and improve international competitiveness. Up exports, down imports

42
Q

What are Non-Tariff Barriers?

A

Protectionist measures other than through imposition of tax and tariffs, e.g. voluntary export restraints + technical regulations

43
Q

Costs of protectionism to consumers?

A

~Restricted choice
~Up prices, lower CS
~Less competition

44
Q

Impact of protectionism on producers?

A

benefits:
~Higher output, sales and profit
Costs:
~Higher costs of production

45
Q

Costs of protectionism to governments?

A

~Direct costs
~Inefficiency + economic damage

46
Q

Benefits of protectionist policies to governments?

A

~Up tax revenue
~Jobs/industries protected

47
Q

Effects of protectionist policies on living standards?

A

Benefits:
~Industries, employment + output protected
Costs:
~Distortion of comparative advantage

48
Q

Effects of protectionist polices on equality?

A

Benefits:
~Jobs for low-income workers protected
Costs:
~Long-term growth constraint

49
Q
A

macroeconomics (7 decks)

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