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Theme 4: A global perspective Flashcards

1
Q

What is globalisation?

A

Globalisation is the increasing integration of economies through trade, investment , technology and movement of people.

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2
Q

What are the main characteristics of globalisation?

A

1.Increased trade-more imports and exports
2.Free movement of capital and labour-Migration and investment across borders
3.Growth of multinational corporations- Large firms operating in multiple countries
4. More international economic cooperation-WTO, EU, trade agreements
5.Technology and communication advances- Internet, social media and AI.

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3
Q

What are the causes of globalisation?

A

Trade liberalisation-Fewer tariffs and quotas
Technological advancements-Faster communication and transport
Growth of MNCs-large firms expanding worldwide
Financials markets-Easy global investment flows.`

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4
Q

What are the impacts of globalisation?

A

Economic growth-Increase trade, investment and job creation.
Lower price and more choice-more imports=more competition
Technology transfer-developing countries benefit from new tech
Income inequality-wage rise in skilled sectors but not in low skilled ones
Environmental damage-More production=More pollution
Loss of cultural identity- Westernisation and dominance of big brands

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5
Q

What are the pros and cons of MNCs in developing countries?

A

Pros-Investment and job creation-Boosts employment and skills
Pro-Technology and infrastructure improvements-MNCs bring innovation
Cons-Exploitation of workers-Low wages and poor conditions
Cons-Profit repatriation-Money made in poor countries is sent back to rich ones.

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6
Q

What is specialisation in trade?

A

Countries focus on producing what they are best at and trade for what they lack

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7
Q

What is the theory of comparative advantage?

A

A country should specialise in producing goods where it has the lowest opportunity cost and trade for other goods.

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8
Q

What are the advantages and disadvantages of specialisation?

A

Pros-More efficiency-Countries produce at lower costs.
Pros-Greater variety of goods-Through trade.
Cons-Over-reliance on one industry-Dangerous if demand falls.
Cons-Structural unemployment-If industries decline, workers may struggle to retrain.

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9
Q

What are the types of trade protectionism?

A

Tariffs-Taxes on imports.
Quotas-Limits on how much can be imported.
Subsidies-Government payments to domestic producers.
Regulations-Health and safety rules that make imports harder

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10
Q

What are the arguments for and against protectionism?

A

Pros-Protects domestic jobs
Pros-Shields infant industries from competition
Pros-Reduces trade deficits
Cons-Higher prices for consumers
Cons-Retaliation from other countries
Cons-less choice and innovation

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11
Q

What is a trading bloc?

A

A group of countries that agree to reduce trade barrier between them.

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12
Q

What are the types of trading blocs?

A

Free trade area-No tariffs between members
Customs Union-Free trade+common external tariffs
Single market-Free movement of goods, services, capital and labour
Economic union-Single market+Shared economic policies

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13
Q

What are the benefits and drawbacks of trading blocs?

A

Pro-Increased trade and investment
Pro-Economies of scale for firms
Pro-More competition=Lower prices
Con-Can exclude poorer countries
Con-Reduces national sovereignty
Con-Risk of trade diversion

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14
Q

What is the world trade organisation?

A

A global organisation that promotes free trade and resolves trade disputes.

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15
Q

What are the criticisms of the WTO?

A

-Favours richer countries
-Allows exploitation of workers
-Weak enforcement of environmental protection

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16
Q

What is absolute poverty?

A

When people lack basic necessities such as food, clean water and shelter. The world bank defines absolute poverty as living on less than $2.15 per day

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17
Q

What is relative poverty?

A

When people earn significantly less than the average income in their country, meaning they have lower standard of living compared to others.

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18
Q

What causes poverty?

A

1.Unemployment-No income=no basic needs met
2.Low wages-Even with a job earnings may be too low
3.Lack of education-Fewer job opportunities
4.Health issues-Prevents people from working.
5.Political instability-Wars and corruption harm economic stability `

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19
Q

What are the consequences of poverty?

A

-Poor health and lower life expectancy
-Lower economic growth
-Increased crime and social unrest

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20
Q

What is income inequality?

A

When income is unevenly distributed within a society

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21
Q

What is the lorenz curve?

A

A graph showing the distribution of income. The further the curve is from the line of equality, the more unequal the income distribution.

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22
Q

What is the gini coefficient?

A

A measure of income inequality ranging from 0 to 1:
0=perfect equality
1=perfect inequality

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23
Q

What are the causes of income inequality?

A

-Differences in education and skills
-Inheritance
-Discrimination
-Tax systems

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24
Q

How can governments reduce inequality?

A

-Progressive taxation
-Welfare benefits
-minimum wage laws
-education and training

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25
What are the arguments against government intervention?
-Higher taxes can discourage work and investment -Welfare can reduce incentive to work -Government failure
26
What is economic development?
A broader measure of a countries progress, including improvements in living standards, education, health and income
27
What are the key measures of development?
1.GDP per capita-measures average income but doesn't show inequality 2.Human development index-Includes life expectancy, education, and income
28
What are the limitations of these measures?
-GDP per capita ignores quality of life -HDI doesn't account for inequality within countries
29
What factors affect economic development?
Pros- -Investment in human capital -Infrastructure development -access to finance -political stability and good governance Cons- -Natural disasters and climate change -Conflict and war
30
How does institutional quality affect growth?
-Strong legal systems=Property right and contract enforcement -low corruption=resources used efficiently -Stable government=encourages long term investment
31
What are the market based strategies to promote development?
Pros- -Trade liberalisation -FDI -Privatisation-improve efficiency Cons- -Can increase inequality -Environmental damage
32
What are the interventionist strategies?
-education and healthcare investment -infrastructure spending -subsidies for key industries Cons- -High government spending -Risk of inefficiency and corruption in public projects
33
What is the role of international aid?
-provides short-term relief -Fund long-term infrastructure and education Cons- -Can create dependency on aid -Funds may be misused due to corruption
34
What is debt relief?
-Developing countries often struggle with high debt repayments -Debt relief allows them to invest in development instead -Critics argue reduces incentives for responsible borrowing
35
What are financial markets?
Markets where individuals, businesses and governments can buy, sell and borrow financial assets
36
What are the main functions of financial markets?
Facilitate saving-Banks provide a safe place for saving Lend to businesses and individuals-enables investment and economic growth Provides insurance-Protects against financial risks Facilitate trade of financial assets-Stocks and bonds allow firms to raise capital Foreign exchange market-Allows currency conversion for international trade
37
What are the types of financial markets?
Money markets-Short term borrowing and lending Capital markets-Long term finance Foreign exchange market-Currency trading Derivatives market-Futures and options contract
38
How can financial markets fail?
Asymmetric information-Banks may hide risks from customers Moral hazard-If banks expect government bailouts they take excessive risks Speculation and asset bubbles-Excessive investment inflates asset prices Market rigging-banks collude to manipulate markets
39
What are the consequences of financial market failure?
-Bank collapses and economic crises -Unemployment and reduced growth due to credit shortages -Government bailouts increase public debt
40
How can governments regulate financial markets?
Central bank oversight-Ensures stability and prevents excessive risk taking Capital requirements-Banks must holds enough reserves to cover losses Laws against insider trading and fraud-prevents corruption Cons-Too much regulation can reduce investment and slow growth
41
What are the function of a central bank?
Monetary policy implementation-Controls interest rates and inflation Lender of last resort-Provides emergency funds to banks Regulation and supervision-ensures financial stability Issuing currency -Controls the money supply
42
What are the functions of a central bank?
Monetary policy implementation-Controls interest rates and inflation Lender of last resort-Provides emergency funds to banks Regulation and supervision-Ensures financial stability
43
Why is the lender of last resort function important?
Prevents bank runs where many depositors withdraw funds at the same time, causing financial collapse.
44
What are the limitations of central banks?
-Difficult to control inflation and unemployment simultaneously -Moral hazard-banks may take excessive risks, expecting bailouts -Time lags monetary policy effects take time to filter through the economy
45
What is public expenditure?
Government spending on good, services and welfare
46
What are the types of public expenditures?
Capital expenditure-Investment in infrastructure Current expenditure-Day to Day spending Transfer payment-Welfare benefits
47
What causes rising public expenditure?
Aging population-Higher healthcare and pension costs Economic crises-Increased welfare spending Government borrowing and debt interest payments Expansion of public services-More demand for education healthcare
48
What are the consequences of high public spending?
-Stimulates economic growth -Reduces income inequality Cons- -Budget deficits and rising national debt -Crowding out effect-government borrowing reduces private sector investment -Higher taxes-can reduce incentive to work and invest
49
What are the main types of taxes?
1.Direct taxes-Levied on income and wealth 2.Indirect taxes-Levied on spending 3.Progressive tax-Higher earners pay a larger percentage of their income 4.Regressive tax-Lower earners pay a higher proportion of their income
50
What makes a good tax system?
Fairness-Based on ability to pay Certainty-Clear and predictable Convenience-Easy to collect and pay Efficiency-Minimal impact on economic decisions
51
What are the impacts of taxation on the economy?
Pros- Higher government revenue-funds public services Redistributes wealth-Progressive taxes reduces inequality Cons- Disincentives to work and invest-Higher taxes can reduce productivity Tax evasion and avoidance-People and businesses may try to avoid paying
52
What is a budget deficit?
When government spending exceeds tax revenue in a given year
53
What is budget deficit?
When government spending exceeds tax revenue in a given year
54
What is a budget surplus?
When government revenue exceeds spending
55
What is national debt?
The total amount of money a government owes over time
56
How can governments reduce budget deficits and debt?
Pros- -Cut government spending -Increase taxes -Promote economic growth Cons- -Spending cuts may reduce economic growth -Higher taxes may discourage work and investment
57
What are the consequences of high national debt?
Higher interest payments-Less money for public services Risk of inflation-Governments may print money to pay off debt Lower investor confidence-Can lead to rising borrowing costs
58
What are the types of macroeconomic policies?
Fiscal policy-Government spending and taxation to influence the economy Monetary policy-Central bank controls interest rates and money supply Supply side policies-Measure to improve productivity and efficiency
59
What are the effects of expansionary and contractionary fiscal policy?
Expansionary fiscal policy-boosts growth an reduces unemployment Cons- -Risk of inflation and budget deficits Contractionary fiscal policy-Reduces inflation and debt Cons- Can slow down economic growth and increase unemployment
60
What are supply side policies?
Education and training-improves workforce skills Reducing taxes-Encourages work and investment Labour market reform-Reduces trade union power to increase flexibility Privatisation and deregulation-increases competition and efficiency
61
What are the limitations of supply side policies?
Time lag-takes years to see the impact May increase inequality-lower taxes and deregulation often benefit the rich more Privatisation may lead to worse services if firms focus on profit over quality
62
What is globalisation?
The increasing integration of economies worldwide leading to greater trade, investment and movement of people and capital
63
What are the main causes of globalisation?
Technological advancements-faster communication and transport Trade liberalisation-reduction of tariffs and quotas Growth of multinational corporations-Expanding global reach Improvements in transport infrastructure-lower shipping and travel Financial deregulation-easier movement of capital between countries
64
What are the benefits of globalisation?
Greater consumer choice-more goods and service available. Lower price-Increased competition drives down costs Economic growth-more trade and investment boosts GDP Access to new markets-Firms can expand internationally Improved labour mobility-Workers can move for better opportunities
65
What are the drawbacks of globalisation?
Income inequality-Richer nations and individuals benefit more Loss of domestic industries-Cheap imports can harm local businesses Environmental concerns-More production and transportation=Higher carbon emissions Increased financial instability Increased financial instability-Global recessions spread more easily
66
What is comparative advantage?
A country should specialise in producing goods and services it can produce at the lowest opportunity cost then trade with other
67
What are the assumptions of comparative advantage?
Pros- -No transport costs -No trade barriers -Perfect knowledge of market -Perfect mobility of factors of production Cons- -In reality these assumption often dont hold
68
What are the benefits of trade?
-Access to more goods and services -Lower price and greater efficiency -Encourages innovation and competition
69
What are the downsides of trade?
Structural unemployment-Domestic workers may lose jobs Over-specialisation risks-If demand falls the economy suffers. Environmental costs-Increased production and transportation pollution
70
What are terms of trade?
The ration of a countries export price to its import prices Terms of trade=(index of export price/Index of import prices) X 100 TOT improvement-Export prices rise relative to imports

Economics (5 decks)

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