THE GLOBAL ECONOMY Flashcards
What is globalisation?
- Globalisation refers to the integration between different countries and economies, resulting in increased trade, financial flows, technological change, foreign investment, and the international division of labour.
What does Gross World Product (GWP) represent?
Gross World Product (GWP) represents the total output of goods and services produced by all economies in the world over a specific time period.
How is Gross World Product (GWP) measured?
measured based on relative purchasing power parity (PPP), which adjusts the market value of goods for variations in exchange and inflation rates to enable comparisons between economies.
What is free trade?
where the government does not impose any artifical barriers in the trade of goods and services
What is the economic principle underlying free trade?
- competitive advantage
What is competitive advantage?
A principle that suggests that countries should specalise in producing costs where there they have they lowest opportunity cost= more efficent
Explain the concept of opportunity cost in the context of comparative advantage.
Refers to the cost of choosing to produce one good over another alternative good.
How is comparative advantage determined between two countries?
Comparative advantage is determined by comparing the opportunity costs of producing goods between two countries. If one country has a lower opportunity cost in producing a particular good compared to another country, it has a comparative advantage in that good
What are the advantages of free trade?
How does free trade encourage international competitiveness and technical efficiency?
What impact does free trade have on living standards and economic growth in the long term?
Explain the concept of specialization and allocative efficiency in the context of free trade.
How does free trade improve access to goods and services
