Unit 4 Flashcards
what is an emerging economy?
one that has increasing growth rates (GDP) but relatively low income per capita.
what is HDI?
a measure of a country’s development which takes into account GNI, Average years of schooling and life expectancy
what are the 4 key indicators of growth?
GDP per capita
literacy rates
Health indicators
HDI
define specialisation
specialisation occurs when a country or business decodes to focus on the production of particular goods or services
two benefits of specialisation
-lower unit costs due to economies of scale, which may allow businesses to lower prices and increase sales or achieve higher profit margins
-excess output can be sold abroad as exports
define FDI
FDI is the value of inward investment from other countries/businesses into a country over a period of time
1 benefit of FDI for a country’s economy
increased economic growth as there is an inflow of money into the country
what is structural change in an economy?
when a country, industry, or market changes which sector of the industry they primarily operate in
what is containerisation?
a global shipping method that allows large volumes of goods to be transported quickly and easily
what is trade diversion?
where trade is taken away from efficient producers who operate outside of a trade bloc and replaced by trade within the bloc.
What is an external tariff wall?
An external tariff wall is a tax applied to imported goods by a group of countries that have formed a trade agreement. This protects businesses within the trading bloc from competition from those outside of the trading bloc.
1 impact of import quotas
they may cause product prices to rise by limiting supply
What is meant by the term trading bloc?
a group of countries that have signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves.
What is meant by the term free trade area? give an example
where all tariffs and quotas are removed on trade in goods between member countries. Example: NAFTA
customs union characteristics (3) and example
-no internal trade barriers
-common external tariff on goods coming from outside the bloc
-Member countries are not free to make their own individual trade agreements
-CARICOM
Common market characteristics (4) and example
-no internal trade barriers
-common external tariff on goods coming from outside the bloc
-Member countries are not free to make their own individual trade agreements
-free movement of labour and capital
-ASEAN
Economic and monetary union characteristics (5) and example
-no internal trade barriers
-common external tariff on goods coming from outside the bloc
-Member countries are not free to make their own individual trade agreements
-free movement of labour and capital
-common currency
-EU
Advantages of being in an FTA for businesses in NAFTA
-Allows US businesses to produce their goods much more cost effectively in Mexico due to lower labour costs
-Led to increased job creation in Mexico due to increased demand for Mexican labour
Advantages of trading blocs for businesses (4)
- Access to a wider market due to free movement of goods
- Businesses within the trading bloc are protected from competition outside the trading bloc by external tariff walls
- Businesses can get government support e.g subsidies to help maintain their competitiveness within the bloc
- Free movement of labour means there is a high supply of labour which may lead to lower wages
disadvantages of trading blocs for businesses (5)
- There is increased competition for businesses within the bloc, impacting small businesses
- All businesses must adhere to common rules and regulations.
- Other countries may retaliate to external tariffs.
- Businesses may feel less incentive to become more efficient because they face less overall competition
- May lead to trade diversion- trade is taken away from efficient producers who operate outside the trade bloc
import quota definition
a government-imposed limit on the amount of a particular product allowed into the country
define protectionism
an approach used by governments to protect domestic industries from foreign competition e.g. tariffs
Main impact of tariffs
A tariff increases the price of imported goods which helps to shift demand for that product/service from foreign businesses to domestic businesses
Benefits of tariffs (3)
- They protect infant industries so they can eventually become more competitive globally
- An increase in government tax revenue
- Reduces dumping by foreign businesses as they cannot sell below the market price