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Macro economics > The international economy > Flashcards

The international economy Flashcards

1
Q

Globalisation

A

the increasing intergration of economies internationally

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2
Q

characteristics of globalisation

A

free movement of capital and labour

free trade between goods and services between countries

availability of technology and intellectual capital

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3
Q

MNC

A

multi national company which function in a country other than the one of origin

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4
Q

causes of globalisation

A

trade liberalisation which is the removal of tariffs or restrictions

firms expanding oversees to exploit there economies of scale

growth in international trading blocs

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5
Q

How MNCs cause Globalisation

A

increase in MNCs in their growth and influence leading to more trade and investment

MNCs wishing to increase profits by an increase in FDI

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6
Q

Consequences of globalisation for developing countries

A

MNCs could exploit workers through low wages

Skilled workers leave to join for developed countries

increase investment

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7
Q

Consequences of Globalisation for developed countries

A

increased imports has a negative effect on the balance of payments

MNCs get access to cheap labour lowering production costs and prices

Cheap overseas production has led a reduction in certian industries for example due to cheap clothes in bangladesh it leads to a collapse in the text stiles industry

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8
Q

international trade

A

the exchange of goods and services between countries

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9
Q

advantages of international trade

A

increased competition

additional markets allow firms to exploit economies of scale

it can expose firms to new ideas and skills

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10
Q

disadvantages of international trade

A

higher transport costs

currency exchange has costs

regulatory and legal costs in oversees markets

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11
Q

Absolute advantage

A

when output of a product is greater per unit of resource of any country

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12
Q

comparative advantage

A

when the opportunity cost of producing a good is lower than the opportunity cost for other countries

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13
Q

terms of trade

A

is a countries relative price of exports compared to its imports

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14
Q

terms of trade index

A

index of average price of exports divided by index of average price of imports

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15
Q

free trade

A

international trade without restrictions such as tariffs and quotas

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16
Q

WTO

A

The world trade organisation helps trade be as free as possible it helps settles agreements and settle disputes

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17
Q

tariffs

A

is a form of tax on selected imports

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18
Q

quotas

A

they limit the quantity of a certain good which can be imported

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19
Q

embargoes

A

bans that are imposed on certain products

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20
Q

trade disputes

A

when one country or trading bloc is seen to be acting unfairly when trading internationally

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21
Q

Ad valorem

A

tax taking a percentage value of a good

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22
Q

costs of protectionism

A

restricts and reduces specialisation reducing efficiency

higher prices leading to higher inequality

reduces choice for consumers

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23
Q

trading blocs

A

are associations between different governments which promote and manage trade

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24
Q

Free trade areas

A

all barriers are removed between members can still impose barriers on outside countries like NAFTA

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25
Q

Customs unions

A

these are free trade areas where standard tariffs are imposed on non members

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26
Q

Common markets

A

these are customs unions with the addition of free movement of factors of production between members

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27
Q

Monetary unions

A

members implement a single, common currency, therefore have a common monetary policy for example euro zone

28
Q

tarriffs imposed on imports graph

A

if a fixed tariffs are imposed it increases prices from pe to p1

domestic demand reduces

domestic supply increases

consumer surplus reduces

net welfare loss

domestic producer surplus increases

29
Q

reasons for changes in world patterns of trade

A

changes in comparative advantage with developed countries having high value products and developing countries having lower value products

growth of trading blocs meaning increased trade between monetary unions

increasing emerging economies have a big impact on trade

30
Q

patterns of trade in UK

A

exports fall and imports rise

decline in exports is due competition from emerging and new industrialised economies

imports rise as goods are cheaper to buy from less developed countries

31
Q

Balance of payments

A

records all flows of money into and out of a country

32
Q

sections of a current account-trade in goods

A

trade in goods measure imports and exports of visible goods

33
Q

trade in services-sections of a current account

A

measures imports and exports of services such as insurance

34
Q

primary income-sections in a current account

A

the flows of money in and out of a country resulting from employment or earlier investment

35
Q

secondary income

A

transfers are movements between countries who arent paying for goods and services and that arent investment

36
Q

causes of a current account deficit

A

High levels of consumer spending on imports

countries who cant compete internationally see a reduction in exports

external shocks-rises in the prices of raw materials decrease in exports

37
Q

causes of a current account surplus

A

low value domestic currency-exports cheaper and imports more expensive

high interest rates-more saving,less spending

in recession there will be a fall in imports and overall spending

38
Q

consequences of BOP deficit

A

show that a economy is uncompetitive

a deficit could bring a higher standard of living through imports

fall in the value of currency leading to higher import prices

39
Q

consequences of a BOP surplus

A

surplus shows a economy is competitive

it could lead to a overeliance on exports

could create inflationary pressure if the price of materials rise

40
Q

Policies to correct a current account deficit

A

increase the price of domestic goods to increase exports and reduce imports

restrictions on imports like tarriffs

devalue or depreciate the currency making exports cheaper

41
Q

Policies to correct a BOP deficit

A

raise the value of currency

reduce the demand for exports and increase imports

42
Q

global impact of correcting imbalances

A

supply side policies lead increase in world trade and growth

restrictions on imports could lead to trade wars, reduction in international trade

economic growth could be limited in developing countries reducing growth and efficiency

43
Q

fixed exchange rates

A

where the government or bank sets the exchange rate

44
Q

floating exchange rate

A

is free to move with changing supply or demand

45
Q

How can government influence the exchange rate

A

devaluation of fixed exchange rate when exchange rate is lowered

revaluation of exchange rates

competitive depreciation or devaluation when the government deliberately lowers the exchange rate to be more competitive

46
Q

floating exchange rate advantages

A

reduces the need for currency reserves

help reduce a BOP current account deficit decreasing the exchange rate and increase exports

47
Q

floating exchange rate disadvantages

A

make business planning difficult due to fluctuations

fall in the exchange rate can lead to inflationary pressure

48
Q

fixed exchange rate advantages

A

encourages FDI

competitive pressures is on firms

49
Q

fixed exchange rate disadvantages

A

difficult to maintain

they lose control of the interest rates

50
Q

How are floating exchange rates determined

A

they are determined by supply and demand

increase in supply of pounds from s to s1 causes a decrease in value from p to p1

a decrease in demand from D to D1 causes a decrease in value from p to p1

51
Q

Economic growth-economic development and growth

A

Increase in the size of a countries GDP

52
Q

Economic development

A

making value judgements about what would make up a developed country

53
Q

Measures of economic development

A

Real GDP per capita or real GNI(gross national income) per person

its a measure of living standards with per capita being per person

54
Q

GPI

A

genuine progress indicator is an economic indicator that gives a fuller picture of growth apart from GDP like quality of life

55
Q

HDI

A

human development index is a attempt to describe peoples welfare and a countries economic development apart from national income figures like standard of living, health and education

56
Q

factors that affect growth and development-poor infrastructure

A

poor infrastructure doesnt attract FDI, makes it difficult to be competitive like for example poor transport limits goods being transported

57
Q

infrastructure

A

basic facilities and services

58
Q

factors that affect growth and development-education

A

low education means a less productive workforce

59
Q

factors that affect growth and development-investment

A

lack of investment means lower incomes

lack of domestic investment means lower economic growth

it can create a foreign exchange gap where outflows are greater than inflows

60
Q

savings gap

A

the gap between domestic level savings and the investment needed to grow

61
Q

limits to economic growth and development-absence of property rights

A

if people arent sure if they will keep their land then they may not invest in improvements to their homes harming development

62
Q

limits to economic growth and development-corruption

A

corruption is when power is used for personal gain

decrease in effiency as countries resources are diverted away

unreliable bureaucracy which means the tax office is unable to collect taxes

63
Q

policies to promote economic growth and development-Aid

A

aid is used as emergency relief during war or to promote development which is called development aid

64
Q

Aid

A

the transfer of resources from one country to the other

65
Q

promoting growth and development-free market strategies

A

inward strategies like import subsitution, subsidies, high exchange rates, nationalisation

66
Q

promoting growth and development- free market strategies

A

less government intervention and more free trade, outward looking strategy to increase efficiency by freeing the market and removing subsidies, floating exchange rates

Macro economics (6 decks)

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