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Economics Yr2 Macro > The International Economy > Flashcards

The International Economy Flashcards

1
Q

Define Globalisation

A

A process by which economies around the world have become more inter-connected and inter-dependent

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2
Q

What is a standard measure of globalization Give 3 examples of this statistic for 3 countries

A

Trade openness - Exports+Imports as a share of GDP China : 37.8% Germany : 86.9% UAE : 172.8%

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3
Q

Name 4 features of globalisation

A

Increased International Trade

Transnational Brands

Global Supply Chains

Labour Migration

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4
Q

Explain 5 causes of globalisation

A
  • Containerisation and Refridgeration
    • Containerisation - Reduced cost of moving thousands of goods globally
    • Improved mobility of goods
  • Development of the internet
    • Easier communication, sharing of ideas and information
  • Transnational Corporations
    • Trying to exploit economies of scale
  • Drive for free trade
  • Collapse of former planned economies
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5
Q

How different countries does Apple work with companies from

A

43

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6
Q

Explain the size of Singapore’s container trade in 2017

A

They are a container hub

780 million containers handled

More than Italy+France+Russia+Sweden+Uk that yr

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7
Q

Name 4 concequences of globalisation for developed economies

A
  • Reduces macroeconomic volatitilty through diversification
  • Higher risk of failure for small not international firms
  • More direct investments
  • Forces higher wages for a more skilled workforce
  • Deindustrialisation - Creating regional problems (There are only 3 areas in the UK in a budget surplus - the east, Southeast and London)
  • Growth
  • Multinational companies are harder to control and need to be more regulated
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8
Q

Name 4 consequences of globalisation for developing economies

A
  • Increases inequality
  • More jobs, higher incomes
  • More investment for growth
  • Developed nations deskill the developing notions as talent moves abroad
  • Multinational companies are more difficult to control
  • Difficult to establish new industries as they cannot compete with existing industries benefiting from economies of scale across the world
  • Will find it difficult to compete with the rest of the world
  • Multinational companies can exploit workers as the country would need them to stay so would allow poverty pay
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9
Q

Name 5 benefits of globalisation

A
  • Lower prices/greater choice
  • Economies of scale, lower prices
  • Increased global investment
  • Free movement of labour
  • Reduce global inequality
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10
Q

Name 5 costs of globalisation

A
  • Structural unemployment
  • Environmental costs
  • Tax competition and avoidance
  • Brain drain from some countries
  • Less cultural diversity
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11
Q

Give some real world context on the point of Tax competition and avoidance

A

Republic of Ireland creating a tax haven for firms so they set up subsidiaries in the country

Caused them to become one of the fastest growing economies in the world

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12
Q

Define Economic Development

A

Increase in citizens’ quality of life

HDI

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13
Q

Explain 5 characterisitics of an LDC

A
  • Population explosion
    • But there is an inelastic supply of inputs, so a lot of surplus labour
  • Agrarian Economy
    • Agriculture contributes to 30-50% of national income
  • Shortage of capital
  • Unproductive investment
    • Not enough is saved , poorer people have low MCS so low saving means low growth,
    • Money saved is spent on black markets, decorating ‘Gods’ …
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14
Q

Give 5 examples of indicators of development and what they are

A
  • GDP
    • Gross domestic product
    • How much money a country makes from its products
  • GNP
    • GDP + Money earned from investment abroad
  • GDP/GNP per capita
    • GDP/GNP divided by population
  • Human Development index
    • Unitied Nations index
  • Birth/death rates
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15
Q

What is HDI

A

Human Development Index

Ranks the world’s countries into 4 tiers of human development on a scale of 0 to 1

Based on Life expectancy, education, per capita income indicators …

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16
Q

Name 4 countries, their HDI ranking and what their HDI is

A

Norway 1st 0.954

UK 15th 0.920

Nigeria 158th 0.534

Niger 189th 0.377

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17
Q

State 5 policies that can be used to cause economic growth/development

A
  • High quality education/healthcare
  • Expansionary fiscal/monetary policy
  • Subsidies to encourage investment
  • Redistributive policies
  • Supply side policies
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18
Q

State 5 limits to growth/development

A
  • Infrastructure gaps
  • Human Capital Inadequacies
  • Primary product dependence
  • Corruption
  • Savings gap
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19
Q

How are infrastructure gaps a limit to growth/development

Give some real world context

A

High supply costs, damaging export competitiveness and making the economy less attractive for foreign investment

Asia needs $8 trillion in 2020’s to plug its infrastructure deficit

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20
Q

How are human capital inadequacies a limit to growth/development

A

They are skills/capacities that reside in people but aren’t put to productive use

Brain drains of younger, more skilled workers moving abroad

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21
Q

What is Primary Product Dependence

How is it a limit to growth/dependence

A

Having a high dependence on extracting/exporting primary commodities

These are vulnerable to volatile global prices

Often fuel corruption, inequality, wasteful consumption

22
Q

Explain the debate of the role of aid and trade in promoting growth/development

A

Orthodox view by UK USA is that free trade/trade liberisation are more important than aid

Free market economists believe international specialisation/complete free trade under the principle of comparative advantage benefit all countries involved

23
Q

Define Aid

A

Money, goods, services, soft loans given by the government of one country/multilateral organization to help another country

24
Q

What is the Strategic Trade Theory Argument

A

By Korean economist Ha-Joon Chang

Governments in already developed countries are in favour of free trade but only until the developing economies start giving them competition

They then use protectionism to protect themselves from the ‘unfair competition’

25
Q

What is absolute advantage

A

When a country can produce more of a good than other countries from the same amount of resources

26
Q

How can one work out comparitive advantage from absolute advantage

A

When 1 country possesses an absolute advantage in both products, its comparative advantage is in producing the good with the higher absolute advantage

27
Q

What is the law of comparitive advantage

A

A country should specialise in the goods/services it can produce at the lowest opportunity cost and then trade with another country

28
Q

What is the law of absolute advantage

A

When a cou

29
Q

How may total output across 2 countries increase through their trading decisions

A

If they both choose to produce the good/service they have a comparative advantage in

30
Q

Name 3 assumptions underlying the law of comparative advantage

A
  • Factors of production are immobile between countries, its only finished products that move between countries
  • There are constant returns to scale
    • Usually, the amount that 1 unit of a resource is assumed to produce changes
  • Demand and cost conditions are relatively stable
    • Usually it would be risky for a country to specialise in narrow range of products as its prices can be volatile, affecting the country
31
Q

Define a quota

A

Physical limit on the quantities of imported goods allowed into a country

32
Q

Define a tariff

A

Taxes imposed on a product when its imported

33
Q

What is an export subsidy

A

Money given to domestic firms bey the government to encourage firms to sell their products abroad and help make their goods cheaper to export markets

34
Q

What do supporters of free trade believe about import controls

A

They prevent countries from specialising in activites in which they have a comparative advantage and from trading their surpluses

35
Q

In what contexts does the case for free trade start to weaken

A

Contexts where the assumptions of the law of comparative advantage are more incorrect

36
Q

What are exchange controls

A

Government imposed limitations on the purchase sale of currency

Allows countries to have more control on inflows/outflows of currency, reducing exchange rate volatility, stabilising the economy

37
Q

What is competitive devaluation

A

When a country devalues its currency to increase its international competitiveness

38
Q

What is protectionism

A

Protecting a country’s domestic industries, companies and jobs from foreign competition

39
Q

Name 5 protectionism policies

A

Tariffs

Quotas

Export subsidies

Exchange controls

Competitive devaluation

40
Q

Name 3 concequences of using tariffs

A

Increases the price of imports and reduces its competitiveness domestically

Raises tax revenue which can be used to subsidise domestic firms

Increase the price of imported goods paid by domestic consumers

41
Q

Name 6 arguments for protectionism

A

Anti dumping laws

Protecting domestic jobs

Environmental concerns

Protecting infant industries

Reduce a balance of payments deficit

Aids economic recovery

42
Q

What are anti dumping laws

Give an example of one

A

Imposing tariffs that increase the price of imports hen they are sold below cost of production to reflect their cost of production

US tariffs on Bombardiers A-220

43
Q

Explain how environmental concerns are an argument for protectionism

A

Globalisation is bad for the environment

Large corporations are moving production to lower income countries with lower environmental protection standards

Portectionism combats this

44
Q

What does protecting infant industries do

A

Block imports/competition allows industires to achieve economies of scale and become competitive

Attracts foreign investment

Creates more government revenue when they grow

45
Q

What are the disadvantages of protecting infant industries

A

Encourages firms to be inefficient

May cause retaliation from other countires

May be difficult politically to remove protective measures

46
Q

How did the development of the internet allow for globalisation

A

Allowed for precise and fast information, more allocative/productive efficiency

Contributed to collapse of planned economies, difficult to control information and keep economy closed

47
Q

How did the collapse of the former planned economies allow for globalisation

A

A third of the world population was in these planned economies, so just a lot more people become free

More opportunities for trade etc.

48
Q

What are 2 benefits of free trade

A

Free trade keeps costs down for firms

Only the most efficient firms thrive, as tariffs/quotas punish efficiency and protect the inefficient, by pushing up the costs for the efficient to export

49
Q

Explain 3 Benefits of a Multinational Corporation coming to a developing nation

A
  • They will bring jobs and tax revenue
  • Will bring investment to the country
    • In infrastructure/eduaction/training
  • Will improve skills of workers in country
50
Q

Explain 4 ways a Multinational corporation can damage developing nation

A
  • Prevent the development of home industries
    • Monopolise thanks to their economies of scale
  • May repatriate skills and profits to home countries
    • Move out skilled workers/profits
  • Exploit labour
    • Pay poverty wages/poor working conditions
  • Take advantage of less secure regulations
    • Take advantage of state - ask for tax breaks etc.
    • Threaten to leave, state is desperate

Economics Yr2 Macro (5 decks)

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