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economics yr 12 > topic 1 > Flashcards

topic 1 Flashcards

1
Q

What is self-sufficiency?

A

bring economically isolated and providing for all your needs by yourself (opposite of globalisation)

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2
Q

Consequences of self-sufficiency

A
  • output levels decrease (decreased GDP and SOL)
  • majority workers in primary and secondary industries (decreased specialisation, productivity, incomes and SOL)
  • small populations can’t make ETMS only STMS (less choice, less income)
  • limited by continents factor endowments
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3
Q

What are ETMS/STMS?

A

elaboratory transformed manufacturing (e.g computers, cars bring high income)
/
simple transformed manufacturing (e.g pens, paper bring low income)

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4
Q

Therefore removing international barriers and moving towards globalisations would: +

A

INCREASE IN GDP
- increase in output (specialisation)
- increase in choice
INCREASE IN INCOME
- increase in skill based jobs
- increase in productivity
overall increase SOL

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5
Q

Therefore removing international barriers and moving towards globalisations would: (negatives)

A

INCREASE IN STRUCTURAL U/E
- cause structural change (transition from manufacturing to tertiary industry)
- immigration (skilled migrants taking local jobs)
financial contagion

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6
Q

Global Economy definition

A

the world economy and the sum of all market exchange activities which occur within and between all countries

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7
Q

Gross World Product definition

A

sum of all G&S produced by all economies of the world
GWP –> sum of all nominal GDP’s (e.g $100T = 2022)

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8
Q

Globalisation definition

A

increasing level of economic integration between individual countries that leads to emergence of a global marketplace

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9
Q

BIG PICTURE GLOBALISATION

A
  • how an economy develops through structural change
  • trade liberalisation is good
  • economic integration (international investment and technology) is good
  • increased trade flows (exports and imports) is good
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10
Q

Cross-border flows:

A
  • TRADE: G&S
  • CAPITAL: financial investment funds
  • TECHNOLOGY: TNC’s (transnational cooperations), communications
  • LABOUR: skilled and unskilled labour
    [all free trade except unskilled labour]
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11
Q

Economic Integration definitions

A

refers to the liberalisation of trade between countries

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12
Q

How does economic integration occur?

A

TRADE LIBERALISATION
- removal of trade barriers
- promotion of trade agreements

  • standardisation of G&S –> through TNC’s
  • use of electronic communication & commerce (e.g technology, transport)
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13
Q

Developed Countries definition

A

Advanced industrialised economics measured via high levels of real GDP or income per capita and high SOL
- high RIPC (real income per capita)

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14
Q

Developing Countries definition

A

Countries with low levels of industrialisation, low real incomes per capita and low SOL
- low RIPC (real income per capita)

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15
Q

Indicators of developed vs developing

A
  • GDP per capita
  • HDI (i.e lower avg income)
  • % of workforce in agriculture (haven’t gone through structural change)
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16
Q

Key drivers of globalisation:

A
  • governments (lowering protection and encouraging global trading)
  • deregulation (lowering gov intervention in markets)
  • households (global consumer trends e.g demand for ETM’s and specialised services)
  • businesses (specialisation and growth of TNC’s)
  • technology (transport, communication, etc.)
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17
Q

International trade flows definition

A

physical movement and electronic transfer of G&S across national borders called exports and imports

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18
Q

International financial flows definition

A

flows of money/currencies and other financial flows across international borders used for
- speculative purposes (investing in overseas shares for personal gain)
- investment purposes (directly buy businesses to invest and grow it)

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19
Q

Recently, there is a rapid growth in capital and investment btw countries’:

A
  • equity markets (people have extra savings from increased income from structural change)
  • speculative derivatives markets (new tech)
  • change in BC trends
  • foreign exchange (FX)
  • portfolio or direct foreign investment (most important to globalisation)
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20
Q

Foreign direct investment meaning

A

includes purchase of foreign asset OUTRIGHT (buying company) or purchasing a significant level (>10% of equity)
- buyer has a large degree of control
- done by TNC’s

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21
Q

Foreign portfolio investment meaning

A

involves purchasing ownership rights (equity) to foreign assets without gaining significant control (<10% of equity) OR buys ANY BOND
- bonds have no degree of control

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22
Q

Capital inflows definition

A

liabilities from borrowing money (cheap overseas) overseas to grow economy
- Aus has -$4.2T in liabilities

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23
Q

Capital outflows definition

A

net assets from investing in overseas bonds/shares and money that is owed to Aus
- Aus has +$3.2T in assets

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24
Q

Net Investment Position definition

A

assets - liabilities = -$1T (Aus gov mainly in debt)

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25
Q

Multinational/TNC’s definition

A

activities and resources dispersed globally with an integrated independent network of worldwide operations from supply to chain connections
- e.g raw materials from one country, product manufactured in another, sold to multiple other countries
- each step in done in subsidiaries in different countries
- called production through vertical integration/offshoring

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26
Q

Global Cooperations definition

A

view world as a single marketplace and attempt to standardise products
- have a parents nation (where the cooperation originated) and host nations (nations the cooperation sells in)
- these cooperations make up 70% of the world’s foreign direct investment (FDI)

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27
Q

Subsidiaries definition

A

portion of a business that does a specific task and is directly controlled by the business

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28
Q

Why do Multinational cooperations use vertical integration/offshoring?

A
  • expand revenue
  • reduce costs
  • source raw materials
  • control key supplies (reason for global expansion)
  • control of processing
  • achieving EOS/integration (through cutting production costs by using different countries factor endowments and by standardising products)
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29
Q

What are the ways technology has improved?

A
  • information technology revolution
  • computing and digital technologies
  • internet into households
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30
Q

What are the impacts of improved technology?

A
  • increase in productivity of labour and capital
  • EOS
  • spread of e-commerce
  • rapid global diffusion of technologies
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31
Q

What are microeconomic reforms which improved transportation of G&S and Labour?

A
  • improving public transport and roads (transport G&S and labour quicker , cost and time efficient)
  • containerisation reduces shipping cost (standardised containers are efficiently unpacked by large robots reducing human cost and error)
  • infrastructure
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32
Q

Specialisation definition

A

leads to changing pattern and division of labour in the production or provision of G&S

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33
Q

International Division of Labour definition

A

world divides into different regions which specialise into primary vs tertiary sectors
- developing economies = primary industries
- merging economies = secondary industries
- developed economies = tertiary industries

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34
Q

Offshoring meaning

A

TNC’s with their global reach set up overseas subsidiaries seeking cheaper labour options in major developing countries to increase profits
- EOS

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35
Q

Outsourcing meaning

A

closing internal departments and choosing more efficient or expert external independent businesses contracted to run that section of your business (e.g IT)
- EOS

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36
Q

Migration meaning

A

physical movement by humans from one area to another
- movement of unskilled workers is very common
- emigration = movement out
- immigration = movement in

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37
Q

Skilled workers definition

A

a worker who has a special skill, training, knowledge they can apply to their work

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38
Q

Why are skilled workers brought in?

A

to counter the domestic skill shortage (e.g nursing, doctors, etc.)
- could result in Brain Drain (country waste money to educate citizens and they leave to work elsewhere)

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39
Q

International Trade definition

A

buying/selling transactions of G&S across national borders
- trade in the TRADABLE SECTOR

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40
Q

Imports (M) definition

A

PURCHASE of foreign G&S from abroad that leads to the SELLING of AUD by Australian importers (pay in other currencies)
- raises SOL
- cheaper products
- more choice

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41
Q

Exports (X) definition

A

SALE of Australian G&S to buyers from other countries leading to the BUYING of AUD by foreigners (pay for Aus items)

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42
Q

tradable sector vs non-tradable sector

A

international trade vs domestic trade

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43
Q

THEORY OF FREE TRADE

A
  • rising tide of globalisation benefits all (some more than others)
  • Aus can’t produce all the G&S required due to limited skills and available resources
  • countries specialise in what they are good at and trade the difference
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44
Q

How do countries know what to specialise in?

A

highlighted by the principles of comparative and absolute advantage
- each country should produce the product with the least opportunity cost –> have the most comparative advantage in
- countries should also produce products they have an absolute advantage in compared to other countries

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45
Q

Define Absolute advantage

A

the ability to produce a greater quantity of the one good or service with the same constraints than another country (lower cost) (e.g aus and coal)

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46
Q

Define Comparative advantage

A

where one country can produce multiple products with low cost in comparison to others (absolute advantage) but chooses to produce the one with the least opportunity cost
- efficient use of resources and specialisation allows other countries to specialise in other things

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47
Q

What are Factor Endowments?

A

quality and quantity of a country’s supply of resources (FOP-CELL) a country possesses and can exploit for manufacturing
- differing factor endowments differ the products countries specialise in
- countries with large endowments = more proft
- must have sound institutions (no corruption) to efficiently use resources

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48
Q

BROAD BENEFITS OF FREE TRADE

A

I - international competitiveness (importer vs domestic price competition, lowers prices, increases innovation and quality)
S - standards of living (increase choice, quality, income, GDP and low prices)
E - efficiency in resource allocation through specialisation and comparative advantage to achieve EOS
E - employment (increase productivity and exporting at lower costs increases sales and output)(increase in employment bc labour is a derived demand)

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49
Q

BROAD NEGATIVES OF FREE TRADE

A
  • growing inequality (development gap)
  • structural U/E (low-skilled workers being left behind in transition from manufacturing to tertiary)
  • financial contagion (countries are too dependent on others so swings can easily be transfered = global BC)
  • loss of sovereignty (gov looses control)
  • environmental damage (increase in production therefore pollution)
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50
Q

Reasons for protection –> effectiveness story

A
  1. valid arguments: justified as the long term benefits&raquo_space;> the short term costs
  2. questionable arguments: limited validity as the short term benefits «&laquo_space;the long term costs
  3. Incorrect arguments: based on INCORRECT theory
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51
Q

Reasons for protections

A

VALID:
- infant industry
- prevents dumping
- diversified economic base
QUESTIONABLE:
- protect domestic jobs
- greater externalities
- national security

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52
Q

Infant industry meaning

A

a new domestic industry that hasn’t had the time to reach EOS by operating at the technical optimum and initially unable to compete with more mature and cheaper imports

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53
Q

Infant Industry reason explanation VALID

A

SHORT TERM:
to grow and reach EOS infant industries need temporary protection until they reach EOS
- short term costs &laquo_space;long term benefits (consistent with comparative advantage)
- argument used by LDC’s
DISADVANTAGE:
rent-seeking due to the protection from imports
- companies get lazy instead of working toward EOS
- e.g Aus’ auto industry

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54
Q

Diversification of Economic Base meaning

A

increase variety of G&S produced in an economy (opposite of specialisation, contradicting comparative advantage basis) by increasing protections on G&S they want to produce

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55
Q

Diversification of Economic Base explanation VALID

A

RISKS OF SPECIALISATION
fluctuations in market price in major exports will hugely effect revenue and incomes therefore
REWARDS OF DIVERSIFICATION
- putting in money to these G&S will diversify skills (primary to manufacturers), employment, capital tech usage to achieve EOS
- after EOS is achieves, protections will be removed and domestic will compete against overseas
- short term benefits «&laquo_space;the long term costs

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56
Q

National security meaning QUESTIONABLE

A

looking after NATIONAL INTEREST by protecting industries that are considered to be IMPORTANT to the future economic growth or citizen protection. (e.g tech, weapons, food, etc.)

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57
Q

Dumping definition VALID

A

practise of selling a good in international markets at a price below their cost of production. since import prices are very low, domestic businesses go bankrupt and since the imports control the market, they will suddenly increase prices
- illegal and country should impose tariffs (with approval from WTO)
- hard to prove

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58
Q

Protection of domestic u/e explanation QUESTIONABLE

A

import restrictions shift consumption from imports to domestic goods (increase in domestic output = decrease in U/E)
- however since the country is not specialised in that industry, domestic production in inefficient (cost increases, productivity decreases, inflation increases, income decreases)
- protections will cause other countries to retaliate

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59
Q

Prevent Great Externalities explanation (environmental protection)

A

instead of taxing other countries to discourage polluting production focus on reducing your own nations emissions (e.g China’s 6% tariff on Aus coal)

60
Q

Protection definition

A

Any government action which aims to either hinder foreign competitors of domestic firms or which provides an advantage to domestic exporters and for domestic import competing firms. Main types:
- tariffs
- quotas
- subsidies
- embargoes
- quarantine restrictions

61
Q

Tariff’s definition

A

a government tax (given in %) paid by the importer on imported goods (i.e import tariff, customs tariff, etc.)
- usually eliminated in free trade agreements
- importers pass tax onto consumers so domestic customers pay for tariff

62
Q

Quotas definition

A

a fixed amount of imported goods allowed to enter the country in a set period of time
- quota graphs present IMPORTS supply and demand
- increased quota = less protection

63
Q

Subsidies definition

A

tax payer money ($ per unit) given to domestic producers to offset higher production costs
- increasing international competitiveness
- increasing exporter chances of succeeding in international markets

64
Q

Embargo definition

A

a government order which stops trade with a particular country

65
Q

6 major effects of TARIFFS:

A
  1. price effect (increase) = inflationary pressures
  2. import effect (decrease)
  3. protection/reallocative effect (how much domestic producers benefit)
  4. consumption effect (consumer consumption effect)
  5. revenue effect (government revenue)
  6. redistribution effect (consumer to producer surplus)
  7. retaliation effect
66
Q

Protection and Import Effects of tariffs

A

domestic producers gain greater market share while importers market share decreases

67
Q

Consumption effects of tariffs

A

consumer consumption decreases as price increases

68
Q

Revenue effect of tariffs

A

government gets more revenue from increases in tariffs

69
Q

Redistribution effect of tariffs

A

consumer surplus gets redistributed to producer surplus

70
Q

Price and Consumption effect of subsidy WITH Pw

A

domestic production increases (more money given therefore more output)
domestic price and consumption stays same

71
Q

Price and Consumption effect of subsidy WITHOUT Pw

A

domestic production increases (more money given therefore more output)
domestic price decreases and consumption increases

72
Q

Subsidies arguments for:

A
  • with Pw consumers pay same price
  • with Pw no consumption changes
  • if no Pw price decreases
  • can be a short, temporary government policy (reviewed annually as part of budget)
  • subsidies are less visible, no retaliation effect
  • lower domestic cost for production
  • increase domestic industries international competitiveness
  • subsidies redistribute income (tax)
73
Q

Tariffs arguments against:

A
  • raise prices (Pw)
  • decreases consumption
  • are more permanent as part of long term trade agreements or policies and hard to remove)
  • tariffs are visible aggression against a country (retaliation)
  • tariffs are a regressive tax
74
Q

Quotas graph

A

Import demand (negatively sloped curve) and Import supply (perfectly inelastic line)
Intersection = price at equilibrium
Increasing quota = move right, decreasing quota = move left

75
Q

Equivalence of quota, tariff and tax

A
  • quota number should be the same distance between domestic supply and demand / move up Pw to see equivalent tax
  • start from furthest point of Pw and demand intersection and go back the quota amount / measure the distance between the domestic supply line and the quota line / draw a line
76
Q

Voluntary export restraint

A

self-imposed trade restriction whereby an exporting country limits the quantity of G&S it exports to a specific country to
- avoid trade wars
- give country a degree of control
- encourage domestic selling

77
Q

Local content rules meaning

A

put in place by government to maintain certain standards of domestic production (i.e employment, culture, etc.)

78
Q

Reasons against trade protections

A
  • gain to domestic producers = increase cost of production, decrease in efficiency, increase in price
  • income redistribution worsens
  • foreign producers are worse off (government’s retaliate)
  • domestic society (consumers) and global resource allocation lose under any form of trade proctection
79
Q

trading entities include:

A
  • organisations
  • agreements
  • blocs
  • forums
80
Q

examples of global organisations:

A
  • world trade organisation (WTO)
  • international monetary fund (IMF)
  • world bank (WB)
  • united nations (UN) - minor
  • organisation for economic co-operation and development (OECD) - minor
81
Q

what is the WTO?

A

a forum which establishes trade liberalisation ‘rounds’ between member nations at a global or regional level and settles trade disputes between members
- to join a nation must agree to liberalise trade principles and rules (multilateral agreement btw 164 nations)

82
Q

WTO principles:

A
  • no discrimination –> all countries have ‘most favoured nation’ status
  • national treatment –> don’t discriminate between foreign products
  • free of barriers –> bring down trade barriers through negotiation
  • predictable –> trade barriers can not be arbitrarily raised
  • increased competition –> discourages dumping and export subsidies
83
Q

WTO history:

A
  • originated as GATT (general agreement on tariffs and trade)
  • uruguay round (1986-1994) EFFECTIVE
  • doha round (2001-2016) INEFFECTIVE
84
Q

GATT vs WTO

A
  • GATT was created after WWII to reduce trade barriers in goods (focused on removing tariffs)
  • WTO was established after the 2001 Uruguay round –> focus on trade of G&S and intellectual property (e.g tech, inventions, designs, etc,)
85
Q

Uruguay round:

A
  • in addition to GATT principles, broader trade in agriculture, services, intellectual property and investments
  • faster growth, decrease in development gap, cheaper goods
86
Q

Doha round:

A
  • disagreements on further reducing agriculture protections, lowering tariffs on manufactured goods, reducing service trade restrictions
  • lower barriers and fairer trades –> ED for developing countries –> Nairobi package 2015
  • tensions between developing and developed countries (EU, Japan, US vs BRICS)
87
Q

Issues with WTO

A
  • WTO can’t eliminate all tariffs (allows 10% tariffs + more if violating nation + negotiations of FTA)
  • Doha failure
  • WTO significantly influenced by bigger countries (EU, US, China) which delay compliance
  • rise of BRICS weakens WTO power
  • rise of anti-globalisation sentiment due to increasing inequality, structural change, fear or immigration, etc.
  • nature of contemporary capitalism changed to migrant workers, unregulated capital flow
  • EU has veto power
88
Q

what is BRICS:

A

group of emerging countries (brazil, india, russia, china, south africa, argentina, egypt, ethiopia, iran, saudi and UAE) which promotes peace, security, development and co-operation

89
Q

WTO sucesses:

A
  • more trade
  • dispute resolutions for LDC’s
  • 2015 Nairobi package
  • uruguay round
90
Q

what is the world bank?

A

is an international financial institution which provides low interest loans and interest free grants and technical assistance for developing countries’ projects (e.g education, agriculture, etc.)

91
Q

world banks focuses:

A
  • reconstruction assistance and humanitarian relief (rebuild after disasters and conflicts)
  • infrastructure development projects
  • millennial development goals –> breaking poverty cycle in LDC through debt relief
92
Q

world banks history:

A

set up in 1944 Bretton Woods conference as the IBRD (international bank of reconstruction and development) and IDA (international development association) assisted rebuild after WWII

93
Q

world bank issues:

A
  • dominating by EU, China, US –> voting power based on % of financial contribution to budget
  • developing countries have small voice in loans –> Washington consensus’ more suitable to developed countries
  • promotes interests of foreign investments/TNC’s
  • immunity for workers
  • AIIB weakens WB power
94
Q

what are debt servicing?

A

interest repaid to developed economies on foreign loans to poor countries

95
Q

what is the AIIB?

A

Asian infrastructure investment bank is a multilateral development bank set up and funded by Chinese government to support the building of infrastructure in the Asia-pacific region
- last resort lender
- slow economy + high interest = danger for borrower

96
Q

world bank successes:

A
  • debt relieved for 36 countries under HIPC inititiave since 1996 ($100B saved)
  • climate funding in 2015 paris agreement
97
Q

what is the IMF?

A

international monetary fund is a global organisation that works to achieve sustainable growth and prosperity for all 190 members (US, Japan, AUS, etc.)

98
Q

IMF aims:

A

ensure stability of international monetary system
- stabilising exchange rates
- facilitating international payment systems
provide emergency funds to assist:
- international monetary co-op
- financial stability
- international trade
- sustainable EG, Emp
- reduce poverty

99
Q

what are SDR’s?

A

special drawing rights are neither a currency nor an IMF claim but a potential claim on freely tradable currencies of IMF members (chinese renminibi, Japanese yen, British pound, Euro, USD)

100
Q

SDR purpose:

A
  • created in 1969 to support fixed exchange rate system
  • gives a member central bank access to IMF funds to exchange for foreign domestic currencies
  • SDR interest rate same for lending and borrowing
  • shift to floating regime (gov buying from international markets) weakens SDR’s
101
Q

IMF issues:

A
  • structural adjustment policies –> mandating westernised policies
  • austerity measures –> IMF imposes policies to decrease countries gov spending to ensure debt is paid back
102
Q

IMF successes:

A
  • COVID-19 assistance
  • guaranteed debt relief for poorest 25 countries
103
Q

what are organisations?

A

groups of countries (e.g WTO, IMF, WB, OECD) who come together for general issues related to global trade to
- establish trade rules
- promote trade
- assist with economic co-op

104
Q

what is OECD?

A

organisation for economic co-op and development (1961) defined as a forum for 36 countries aiming to stimulate economic progress and world trade
- aus is a member

105
Q

DISCUSS BIG PICURE ORGS:

A
  • strong past influence
  • weakening gradual influence (due to anti-globalisation forces)
106
Q

what is an FTA:

A

bilateral (2 countries), regional (geographically close) or multilateral (more than 2) agreements to bring down trade barriers btw countries
- members are free to make agreements with other countries (no trade diversion –> can trade with other countries)
- e.g AUSFTA (Aus and US FTA made in 2005 in creation of E3 visa) CERTA, ASEAN, APEC, WTO

107
Q

issues with FTA:

A
  • inefficiencies –> countries don’t buy from low-cost producers with tariffs instead buy from high cost producers with FTA’s
  • secrecy –> agreements can be negotiated in secret
  • loss of gov revenue –> no tariff
  • high regulations –> e.g rules of origin
108
Q

what is rules of origin?

A

a country that doesn’t have an FTA with another sells their products through an intermediate subsidiary in a country they both have FTA’s with
- rules of origin is administrative paperwork to avoid this

109
Q

what is a bloc?

A

group of countries reaching a common agreement on a broad range of trade issues related to economic integration (i.e lowering trade barriers)
- negotiate further agreements as a bloc
- nations of similar geographic location

110
Q

Bloc’s focus:

A

reduce trade barriers to:
- increase competition
- increase consumer choice (increase SOL)
- export market access
freer movement of FOP
- increase employment
- inefficient use of resources
central high court and parliment

111
Q

what is the EU?

A

european union is a supernational political and economic bloc with 27 members

112
Q

what does EU do?

A
  • single trading policy –> members trade with no tariffs but aren’t allowed to negotiate FTA’s outside of EU
  • single market policy –> removal of fiscal, technical, physical barriers allowing free movement of goods, capital, services, people
  • Euro zone –> 19 EU countries who use Euro –> NOT fiscal union
113
Q

what is ASEAN?

A

association of southeast asian nations is an international government and FTA organisation btw 10 southeast asian countries (thailand, indonesia, myanmar, etc.)
- moving toward a potential bloc (Asian economic community) in 2023
- difficult integration due to cultural political and social differences

114
Q

What is TPP?

A

trans-pacific partnership is a partnership agreement between 11 countries (AUS, NZ, Peru, etc) in 2017 (12 + US in 2016)

115
Q

TPP focuses:

A

weakening government power
- decreasing state-owned enterprise
- calling government procured good a protection
high protection for intellectual property
restrict capital flows
ISDS tribunal favours foreign investors

116
Q

What is the RCEP?

A

regional comprehensive economic partnership is an FTA between 15 countries in Asia-pacific (AUS, NZ, China, Japan, Korea + 10 ASEAN)
- US dropped out in 2017 (trump anti-china)
- India doesn’t want to let go of agriculture subsidies

117
Q

RCEP focus:

A
  • tariff reduction
  • single rulebook
  • accomodating rules of origin
  • services trade liberalisation
  • labour mobility
  • e-commerce digital trade
118
Q

what are the G7, G8, G20?

A

G7 - forum of powerful 7 countries (US, Japan, Canada, etc.)
G8 - forum of powerful 8 countries
G20 - forum of powerful 20 countries (aus is in)
discusses economic and political issues
- came up with fiscal plan during COVID
alliances btw powerful economies weakens power of WTO and UN

119
Q

what is APEC?

A

Asia-pacific economic co-op is a forum established in 1989 to promote sustainable growth, trade investment and prosperity in Asia-pacific region
- 21 countries (US, AUS, Japan, Thailand, etc.)

120
Q

calculating opportunity cost:

A

what one sacrifice/what one gain
answer: __ is good A is sacrificed for gain of 1 good B

121
Q

how to find comparative advantage?

A

find the opportunity cost of producing a both products in both countries
find which country has the lowest opportunity cost in each product

122
Q

graphing opportunity cost of product A: PPF

A

put product A on x-axis and product B on y axis
use rise/run of product A opportunity cost to draw line
whichever line has a flatter slope = lowest opportunity cost and comparative advantage

123
Q

economic development meaning

A

the process (structural changes) to improve standards of living measured by GDP PER CAPITA, GNI PER CAPITA, HDI and A CHANGE in any indicator of economic development (mortality rate, education, etc.)
- QUALITATIVE measure of SOL
- broader range of things

124
Q

what is the UNDP

A

(UN development programme) - a summary measure or average achievement in 3 key dimensions of human development:
- a long and healthy life
- being knowledgeable
- decent standard of living

125
Q

Merging economies definition

A

income levels vary but what these economies have in common is fast growth income levels/strongest growth rates in the world (5-10%) and favourable prospects/industrialising usually with substantial manufacturing sectors
- moving from planned to free market
- growing industrial sector

126
Q

why is there a significant difference in SOL between countries

A
  • Physical issues: climate, resources, landlocked
  • Economic causes: global trading positions, the cycle of poverty
  • Historical causes: colonialism
127
Q

what is cycle of poverty

A

Low per capita incomes → low levels of saving → low levels of investment and rates of capital accumulation → low levels of productivity →

128
Q

ppp

A

the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.

129
Q

income definition

A

the flow of money from market to non-market sources - FLOW CONCEPT

130
Q

wealth definition

A

the real and financial assets owned at any given point in time - STOCK CONCEPT

131
Q

economic growth definition

A

is an increase in the output of G&S from an economy, measured through increase in real GDP overtime
- key economic indicator
- QUANTITIVE measure

132
Q

an increase in EG will increase:

A
  • Output
  • Income
  • Wealth
  • Employment
  • Standards of living
133
Q

Standards of living:

A

measure of quality of life from a populations access to G&S

134
Q

development gap definition:

A

difference in real per capita incomes, living standards and quality of life between DC and LDC

135
Q

classifying economies:

A
  • high income/industrialised
  • newly industrialised
  • emerging
  • economies in transition
  • developing
  • poor countries
136
Q

key measure of economic development:

A

real GDP per capita ($) = real GDP/current population
- for ED to occur:
population growth < economic growth

137
Q

other measures of ED are:

A
  • structural change (move away from primary agriculture)
  • poverty levels (reducing poverty, lower Gini-coeff)
  • urbanisation (migration from rural to urban)
  • real GDP per capita
  • UNHDI
138
Q

UN human development index:

A

HDI looks beyond GDP to a broader definition of well-being. The HDI provides a composite measure of 3 dimensions of human development:
- a long and healthy life
- being knowledgeable
- decent standard of living

139
Q

relative poverty definition

A

where a household is unable to achieve a SOL relative to the communities average SOL

140
Q

absolute poverty definition

A

where a household is unable to achieve the basic SOL

141
Q

why is there a development gap?

A

lack of TIPS = lack of EG and ED
- Technology (uptake, labour intensity)
- Incomes (per person)
- Productivity (of labour)
- Savings (due to low incomes)

142
Q

Millenial development goals:

A

focus on breaking poverty cycle in LDC through:
- debt relief
- aid
- halving absolute poverty by 2015

143
Q

5 D’s for causes of differences

A
  • Demographics (high population growth, lack of human capital)
  • Debt (high foreign debt, less savings)
  • Demand-pull (import inflation
  • Dualism (dual economy –> wealthy elite set prices, poor must match them)
  • Demonstration effect (migration demonstrates so everyone migrates)
144
Q

economic dualism definition

A

an urban elite in a formal commercial economy alongside a large traditional rural economy dominated by poverty and agriculture

145
Q

Overall reasons for differences in ED: GLOBAL

A
  • structural change
  • trade system
  • financial system
  • technology
  • aid
146
Q

Overall reasons for differences in ED: COUNTRY-SPECIFIC

A
  • factor endowments (lack of FE to export, low GDP and ED)
  • financial capital (lack of investment, debt, poverty cycle)
  • human capital (lack of education, low productivity)
  • dualist economy (high inequality)
  • institutions (corrupt politics, no response to make countries better)

economics yr 12 (12 decks)

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