Theme 4 Flashcards
Name 4 Causes of Globalisation
- A Fall in Transport Cost
- A Fall in Cost of Communication
- A Reduction in the World Barriers
- Fall of Communism
Name 2 Benefits of Globalisation
- Increase in Supply of Goods + Services
- Helps Economy grow
What are 3 Drawbacks of Globalisation
- Lead to Increased Environmental Damage
- Exploitation of LEDs
- Inequalities
What is meant by Comparative Advantage
When a country can produce a good or service at a lower opportunity cost to another
What are 4 Factors that affect the Pattern of Trade
- Emerging Economies
- Growth of Trade Blocs
- Changes in Exchange Rates
- Comparative Advantage
How do you work out Index of Terms of Trade
Index of Export Prices / Index of import Prices x 100
What can Influence a country’s Terms of Trade
- Exchange Rates
- Incomes
- Technology
What is a Free Trade Area
An area where trade is free with no barriers of tariffs
What is a Customs Union
Free trade with a common external tariff
What is a Common Market
A trade area with common policies on product regulation
What is a Monetary Union
A group of Counties that agree to share a common currency
Define Aid
When a country voluntarily transfer resources to another country or gives them loans
What is Absolute Poverty
People who earn less than $1.90
Define a Market Bubble
The price of the product exceeds the value of the product
What is meant by Market Rigging
The process of colluding and fixing prices at the expense of others
Define Moral Hazard
When the person taking the risk is not the one who bears the consequence of it
Define Absolute Advantage
When a country can produce two products at a lower opportunity cost than the other
Define Trade Liberalisation
The removal of trade barriers to increase growth and development
What are 3 Market Orientated Strategies that might influence growth and development
- Trade Liberalisation
- Removal of Government Subsidies
- Microfinance Schemes
What are the components of HDI
- Health (Life Expectancy)
- Education (Years of Education)
- Living Standards (GNI per Capita)
Define Devaluation
The selling of domestic currency to reduce the value
Define Appreciation
The buying of Foreign currency to increase the value of your domestic currency
Define Protectionism
Putting up trade barriers to protect infant industries so that they can develop
Define FDI
Includes investment by foreign firms into a domestic business
What is meant by Removal of Government Subsidies
Reduces spending on inefficient subsides so that it can be redirected to health + education
Define Buffer Stock Schemes
- It ensure price stability of a product
- It buys the product when price goes below floor to raise demand
- Government sells product when it goes above ceiling to raise supply
Define Microfinance
Very small loans given to individuals who are not able to access loans
Define Privatisation
The selling of state owned enterprises to the private sector
Define Infrastructure Development
The spending of money on Transport, Communication and Energy
What is meant by the Development of Human Capital
Developing the quality and accessibility of education to raise skills in the economy
State 3 Interventionist Strategies
- Infrastructure Development
- Development of Human Capital
- Buffer Stock Schemes
What are the 4 Market Failures in the Financial Sector
- Asymmetric Information
- Moral Hazards
- Market Bubbles
- Market Rigging
What is the Role of the Financial Market
- Facilitate Saving and Lending
- Facilitate Exchange of Goods and Services
- To provide a Forward Market in Commodities and Contracts
- To provide a Market for Equities
What is meant by the Facility to Exchange Goods and Services as a Role of the Financial Market
The ability to make payments, receive wages and pay debts
What is meant by Providing the Market for Equities mean as a Role of the Financial Market
Allowing stocks and shares to be issued and traded
What is meant by Providing Forward Markets in Commodities and Contracts as a Role of the Financial Market
- Allows locking of prices to reduce uncertainty
- Contracts allow protection from exchange rate fluctuations
What are the Roles of Central Banks
- Implementation of Monetary Policy
- Banker to the Government
- Banker to Banks
- Role of Regulation in the Banking Industry
What is meant by Implementation of Monetary Policies as a Role of the Central Bank
Responsible for putting in place Monetary Policies
What is meant by Banker to the Government as a Role of the Central Bank
The central bank has to manage the accounts of the Government
What is meant by Banker to Banks as a Role of the Central Bank
Supplying loans to Banks when in financial difficulties to maintain the stability of the banking system
What is a Progressive Tax
Proportion of tax payed increases as income rises
What is a Regressive tax
Proportion of tax payed falls as income rises
Define Proportional Tax
Proportion of tax payed stays the same as income rises
2 Examples of Direct Tax
- Income Tax
- Corporation Tax
2 Examples of Indirect Tax
- VAT
- Excise duties
Define Automatic Stabilisers
Changes of Tax Revenue and Government Spending when GDP rises or falls without Government Intervention
Define Discretionary Fiscal Policy
Changes in Government Spending and Taxation due to Government Intervention
What is the difference between Fiscal Deficit and National Debt
- Fiscal Deficit is where Government Spending is greater than Tax Revenue
- National Debt is the total cost of the Governments Borrowing
What are 2 Factors that affect the Size of Fiscal Deficit
- Amount of tax Avoidance
- Political Priorities
2 Ways to reduce Fiscal Deficit
- Reduce Government Spending
- Increase Taxes
2 Ways to reduce Poverty and Inequality
- Improve education for the Poorer
- Make Tax system more progressive
What are 3 factors that create problems when making new policies
- Inaccurate Information
- Risk and Uncertainty
- Inability to control External Shocks
2 Ways of Measuring International Competitiveness
- Relative Unit Labour Cost
- Relative Export Prices
2 Factors that can improve a Country’s Terms of Trade
- Increased Demands for Exports
- SPICED
