The international economy

Question 1

what is globalisation

Answer 1

increase rate of interdependence of national economies through growth of trade, investment, trade, and trade barriers

Question 2

Causes of globalisation

Answer 2

Growth of WTO, deregulation, technology, MNCs, economies of scale, geopolitical changes

Question 3

4 main characteristics of globalisation

Answer 3

free trade in goods/services,
increasing foreign ownership of companies
increasing movement of labour & tech. across borders
easy flow of capital across borders

Question 4

Consequences of Globalisation

Answer 4

tax avoidance becomes easier exploit loopholes

Question 5

Consequence of globalisation for less-economically developed countries

Answer 5

Reduction in absolute poverty
Employment opportunities
Depletion of natural resources
Increased power of monopolies

Question 6

Consequence of globalisation for more-economically developed countries

Answer 6

Increased trade
Increased capital flow

Question 7

what is a multi-national corporation (MNCs)

Answer 7

has business operations in at least one country other than home country

Question 8

role of mncs on globalisation

Answer 8

Cross border trade,
Tech. flow
Labour mobility
Capital Flow

Question 9

cause of international trade

Answer 9

because of absolute and comparative advantage

Question 10

what is comparative advantage

Answer 10

when country should specialise in the goods/services that it can produce with the lowest opportunity costs

Question 11

Assumptions of comparative advantage

Answer 11

Transports costs are zero
There is perfect knowledge
Factor substitution is easily achieved
Constant costs of production

Question 12

What is absolute advantage

Answer 12

country can produce using fewer FOP than other countries

Question 13

How to illustrate absolute and comparative advantage

Answer 13

PPF diagram

Question 14

what is free trade

Answer 14

movement of goods/services across borders without barriers to trade

Question 15

benefits of trade

Answer 15

Flow of new ideas
Economic development
Economic Growth
increased efficiency
Access to resources
International cooperation
Greater Choice
Lower prices

Question 16

How can trade lead to greater choice

Answer 16

more variety, standard of living improves

Question 17

How can trade lead to lower prices

Answer 17

competition increases, benefit from economies of scale costs fall and consumers benefit in the form of lower prices

Question 18

How can trade lead to international cooperation

Answer 18

helps better country relationship

Question 19

The disadvantages of international trade

Answer 19

Deficit on the current account - countries import more than export
Unemployment -
Overspecialisation
Loss of sovereignty
External Shocks

Question 20

Reasons for changes in trading patterns

Answer 20

Patterns of trade can change
Comparative advantage
Impact of emerging economies
Growth of trading blocs
Changes in exchange rates

Question 21

what is protectionism

Answer 21

set of policies and practices that aim to restrict or limit international trade to protect a country’s domestic industries from foreign competition

Question 22

why countries adopt protectionist policies

Answer 22

Protect infant firms from lvl of global competition
Sunset industry
Employment (intervene when certain industries step in to protect jobs
Current account deficit

Question 23

disadvantages of protectionism

Answer 23

Price increases
Costs increase
Exports become less competitive
Choice reduce
Inefficient domestic firms
retaliation from other countries

Question 24

how can protectionism lead to reduced choice

Answer 24

Reduces quantity of goods /services to countries to customers

Question 25

how can protectionism lead to increased prices

Answer 25

reduces supply of goods/services leads to higher prices

Question 26

how can protectionism lead to retaliation from other countries

Answer 26

countries may be hurt then retaliate in their own measures which can hurt free trade

Question 27

what is a tariff

Answer 27

tax on imported goods domestic producers have to pay when good crosses border into country raises cost of production leads to higher prices

Question 28

diagram of tariff

Answer 28

like minimum price graph but label it add the tarrif and the new quantity at the new line is the new amount of imported goods

Question 29

analysis of tariff diagram

Question 30

what is the HDI

Answer 30

measurement of development that assesses living standards health and education in an economy

Question 31

HDI adv

Answer 31

It is holistic good for comparing countries

Question 32

HDI disadv

Answer 32

seen as unreliable as it doesn't take into consideration everything Ignores distribution of development

Question 33

what is a current account

Answer 33

part of the balance of payments, measuring a country’s net trade in goods and services, net income from abroad, and net current transfers.

Question 34

what is a capital account

Answer 34

records capital transfers (like debt forgiveness) and the purchase/sale of non-produced, non-financial assets (like patents or copyrights).

Question 35

what is a financial account

Answer 35

records transactions of financial assets and liabilities between a country and the rest of the world, including direct investment,

Question 36

what does it mean when current account is in surplus and deficit

Answer 36

surplus: importsexports

Question 37

what are trading blocs

Answer 37

when countries from a bloc and agree to move trade barriers

Question 38

type of trade barriers

Answer 38

tariff non-tariff regulations quotas subsidies to domestic producers