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Economics Paper 2 > theme 4: international economics > Flashcards

theme 4: international economics Flashcards

1
Q

globalisation meaning

A

when the world economies become more interdependent, interconnected and integrated

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2
Q

factors contributing to globilisation

A

reduce transport cost
containerisation- cheaper to ship goods across the world
technology more affordable
resources more available
free trade
less protectionism
TNCs get cheaper labour so boost output

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3
Q

globalisation impact on consumers

A

wider range of goods
differentiated goods higher
quality goods
cultural diversification
change in taste and fashion
general increase in world GDP so less absolute poverty
SR- lower price (comparative advantage)
LR- inflanitory as there is more demand for all goods

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4
Q

globalisation impact on workers pro

A

free movement of factors of production
increase in AD which means more job opportunities
TNC’s provide work and improve human capital through training

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5
Q

globalisation impact workers con

A

structural unemployment as manufacturing goes to other countries with comparative advantage
more inequality as high skilled labour gets paid more
sweatshops= exploitation of worker
may lead to global monopolies decreasing choice
lower job security

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6
Q

globalisation impact on producers pro

A

source from more countries
sell to more countries
comparative advantage
external economies of scale
increase factors of production
dynamic efficiency and innovation

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7
Q

globalisation impact on producers con

A

firms which cannot compete internationally lose out
international companies can take over domestic companies
brain drain

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8
Q

globalisation impact on government pro

A

higher tax revenue
more global wealth (more assets)
faster economic growth
allows developing countries to borrow money

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9
Q

globalisation impact on government con

A

corruption due to TNC’s (regulatory capture)
loss of sovereignty due to treaties
interdependence greater vulnerability to economic shock

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10
Q

globalisation impact on the environment

A

more concern due to education
pollution due to production and transport
deforestation, water waste, land degradation, environmental dumping

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11
Q

free trade area meaning

A

where 2 or more countries agree to reduce/ eliminate trade barriers

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12
Q

custom union meaning

A

removal of trade barriers and common external tariffs against non members

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13
Q

common market meaning

A

no barriers to trade goods, services, capital and labour

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14
Q

monetary union meaning

A

2 or more countries with a single currency

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15
Q

pro of joining the Euro

A

boosts trade + investment
boosts tourism
financial support + political stability
reduced vulnerability to external shock

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16
Q

con of joining the euro

A

exposure to euro zone monetary problems
may have to contribute to bailout of other countries
lose trade partners
structural reforms
structural unemployment

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17
Q

pro of staying in EU

A

free movement of labour and capital
fill in labour shortages
trade creation
increase FDI
more consumer choice
lower price for raw materials

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18
Q

con of staying in EU

A

loss of sovereignty
uncontrolled immigration
unable to trade freely
have to follow EU laws
give money to the EU so lower gov revenue

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19
Q

pro of trading blocs

A

focus on comparative advantage
increase specialization so EoS
larger customer market
competition encourages innovation
consumers have a higher choice

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20
Q

con of trading blocs

A

distorts world trade
trade diversion- higher priced goods
trade disputes
developed countries attract skilled labour- brain drain- regional decline
less sovereignty

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21
Q

reasons for restriction

A

protect new domestic firms which are not able to compete globally
protects against structural unemployment
protect domestic producers
prevents over specializations so less susceptible to economic shock
tax revenue from tariffs

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22
Q

tariffs meaning

A

tax placed on imported goods

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23
Q

impact of tariffs

A

domestic producers protected against lower prices
decrease consumer surplus
other countries may put tariffs on X
decrease demand of M so improved CA

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24
Q

quota meaning

A

limits placed on quantity imported allowed into a country
creates artificial scarcity

25
impacts of quota on domestic producer
increase price of the good so more profits higher cost of production if they have to import raw materials or components
26
impacts of quota on consumers
higher price higher employment domestically
27
impacts of quota on gov
improved CA rise in GDP no tax revenue from tariff
28
what do domestic subsidies o producers do
lower cost of production higher output revenue increase profit increase develop dependence
29
comparative advantage meaning
when countries can produce at a lower opportunity cost than another country
30
absolute advantage meaning
country produces at a lower cost than another country
31
what can absolute and comparative advantage lead to
specialization to produce a good or service
32
assumptions with comparative advantage
no transport cost costs are constant and no economises of scale goods are homogeneous factors of production are perfectly mobile (no tariffs)
33
pro of specialization of trade
increase in world output economies of scale greater choice for consumers greater competition so innovation
34
disadvantage of specilisation of trade
interdependence- susceptible to economic shock structural unemployment if foreign firms are more efficient environment suffers as increase demand
35
geographical pattern of trade meaning
the countries with which a nation trades with
36
factors influencing patterns of trade
comparative advantage emerging economies - X led growth trading blocs and agreements relative exchange rate
37
terms of trade meaning
price of X / price of M quantity of exports needed to be sold to be able to buy a given level of imports
38
factors influencing tot
exchange rates inflation changes in D / S of imports / exports improvement in the quality = fall in the price of X / M change in incomes
39
impacts caused by tot
improvement: fall i GDP = rise in unemployment = X are less price competitive if PED inelastic X then tot improves and GDP rises = rise in employment as more goods are demanded living standards rise as M brought for cheaper changes in CA Inflation- deterioration of tot means that x is cheaper so then more is consumed so more AD
40
balance of payment meaning
record of all economic transactions made between consumers, firms and gov from 1 county with other countries made of: current account capital account financial account
41
current account meaning
record of countries quantity imported and exported payments made to foreign investors and transfers
42
what makes up the CA
balance of trade in goods- imported and exported goods balance of trade in services- imported and exported services net primary income- interest, profits, dividends and remittances net secondary income- aid, EU contributions
43
Capital account meaning
measures transfers in assets and liabilities
44
financial account meaning
transfers of the ownership of financial assets and liabilities between UK residents and non-residence (financial transfers)
45
causes of a current account deficite
poor tot poor price and non price competition (high inflation pushing up prices of X. lack of R&D so poor quality ) strong exchange rate causing higher price of X recession in trading partners (expensive uk X) volatile global prices changes D changes in demand lack of investment = low productivity corruption
46
consequences of a CA deficite
loss of AD currency depreciation- low D for X = low D for £ supply side weakness loss of FDI- capital flight
47
causes o CA surplus
a lot of natural resources diversification of X strong tot price competitiveness and non price competitiveness high investment = high productivity
48
consequences of a CA surplus
more foreign assets (diversification) strong exchange rate higher employment due to high demand of goods
49
exchange rate meaning
value of one currency compared to another currency or a basket of currencies
50
free floating currency meaning
when the value of a currency is set by supply and demand of the currency
51
pro of free floating
freedom to set monetary policy to manage inflation correct CA deficit reduces need to hold foreign currency reserves less risk to be under or over valued insulates from shocks
52
ev for free floating
can be volatile lack of confidence causes less investment not guarantied to improve BoE
53
fixed exchange rate meaning
when gov sets their currencies value against other currencies or basket of currencies
54
pro of fixed exchange rate
avoids currency fluctuations more confidence so investment control inflation as no sudden changes in price less speculation
55
ev for fixed exchange rate
cannot use IR for objectives developing countries don't have enough foreign currencies to have fixed ER under value currency to make X more price competitive but can cause tariffs under valuing causes cost push inflation
56
international competitiveness meaning
ability of a nation to compete successfully overseas
57
factors influencing international competitiveness
ability to attract FDI ability to attract entrepreneurs so new ideas and innovation ability to attract skilled labour unit labour cost - cost of labour per unit of output exchange rate quality if human capital flexibility of labour- low immobilities economic stability tax regulation rate of innovation IR
58
significance of international competitiveness
more X increase AD attract FDI higher emolyment

Economics Paper 2 (9 decks)

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