Theme 4 Flashcards
What is the definition for globalisation
Increasing interdependence of world economies
Difference between absolute and comparative advantage
Absolute having an uncontested advantage to produce a good or service better. Comparative taking into account who has the better opportunity cost
4 factors affecting the pattern of trade
- comparative advantage
- emerging economies
- trading blocs
- exchange rates
3 types of trade blocs
- bilateral trade agreements = between 2 countries
- free trade areas
- customs union = 2 or more countries
3 types of restrictions on trade
- tariffs = taxes on imported goods
- quotas = limits on imported goods
- embargoes = ban on trade of certain or all products
Impacts of a change in exchange rates
- economic growth
- employment/unemployment
- rate of inflation
Factors influencing international competitiveness
Differences in cost, quality and government policies
Difference between absolute and relative poverty
Absolute is where a person cannot meet the basic needs to survive, but relative means a persons income falls below a certain percentage of the average
Factors influencing growth and development
Economic
- Primary product dependancy (export of agriculture)
- Savings gap > less consumption and investment
- Demographic factors (population)
Non economic
- Political stability
- Environmental climate
- Health and education
Difference between fiscal and government debt
Fiscal debt is when the governments expenses are more then they receive in taxation. National debt is the amount they have to borrow to cover for those expenses
What are automatic stabilisers
Automatic government changes that occur as the economy moves through the business cycle e.g. less tax in recession
3 types of tax
- Proportional
- Progressive
- Regressive
What is the role of financial market
To encourage saving and lend to businesses and individuals
3 reasons for market failure
- Asymmetric information
- Negative externalities
- Market rigging e.g. price manipulation
