Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > Unit 6 > Flashcards

Unit 6 Flashcards

1
Q

what is globalisation

A

the process of interaction and integration among the people, companies and governments of different nations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what are MultiNational Corporations

A

businesses which have their operations in more than one country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

advantages to home country of MNC’s

A

Creates opportunities for marketing the products throughout the world
creates employment opportunities
aids and encourages economic growth
helps to maintain favourable balance of payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

advantages of MNC’s to host countries

A

provides employment and training
transfer of skill and expertise
adds to the host countrys GDP through spending
Competition from MNC act as an incentive to domestic producers
extend consmer and business choice in the host country
bring efficient business practices,technologies and standards which influence industry
source of significant tax revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

disadvantages of MNC’s to home country

A

they transfer capital from the home country to host country
may not create employment opportunities to home country
they can neglect the home industry and economic development

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

disadvantages of MNC to host country

A

domestic businesses may not be able to compete with MNC
may not act ethically or in a socially responsible way
may be accused of imposing their culture
profits earned by MNC may be remitted rather than reinvested
may use tax avoidance measures to reduce the amount they pay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what is free trade

A

when there are no restriction for trade between economies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

advantages of free trade

A

allows countries to benefit from specialisation
increases consumer choice
increases competition and efficiency
creates new business opportunities
enables firms and economies to benefit from the best workforces,resources and technology
increases economic interdependency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

disadvantages of free trade

A

may reduce opportui

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

disadvantages of free trade

A

may reduce opportunities for growth in less developed economies and threaten jobs in developed economies
cause rapid resource depletion
exploitation of workers and their environment
income inequality worsens

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what is protection

A

involves the use of trade barriers by governments to restrict international market access and competition

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what are the types of trade barriers

A

tariffs
subsidies
quotas
embargo
excessive quality standards

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

explain tariff

A

indirect taxes imposed on imported or exported goods to discourage consumer demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

explain subsidies

A

given to domestic producers so that prices for their goods are reduced and demand increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

explain quotas

A

limit on the number of imports allowed into a country in a given period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

explain excessive quality standards

A

imports may only enter a country after extensive quality checks which are costly. foreign producers will be discouraged and imports are reduced

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what are reasons for protection

A

to protect infant/sunset industries
protect strategic industries
limit overspecialization
protect domestic firms from dumping(predatory pricing)
correct a trade imbalance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

consequences of protection

A

restrict consumer choice
restrict new revenue and employment opportunities
can cause cost push inflation
protect inefficient domestic firms
other countries may retaliate with their own policies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what is the foreign exchange rate

A

the value or price of a currency expressed in terms of another currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

how is foreign exchange rate determined

A

by the market demand and supply of the currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

when does demand for a currency exist

A

when foreign consumers want to buy and import goods and services from the country.
overseas companies will buy the countries currency to invest in the country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

when does supply for a currency exist

A

when domestic firms buy foreign currencies to invest abroad/ buy and import foreign goods.
the domestic currency is being supplied abroad

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what is the equilibrium market foreign exhange rate

A

the price at which demand and supply of the currency equals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what does increased supply and decreased demand mean in foreign exhange rate

A

it causes the exchange to fall

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what does decreased supply and increased demand mean in foreign
exchange rate

A

causes exchange rates to rise

26
Q

what is specialisation

A

when a nation concentrates its productive efforts on producing a limited variety of goods and services

27
Q

what is absolute advantage

A

when one country can produce more efficiently than others

28
Q

what is comparative advantage

A

when a country can produce with a lower opportunity cost

29
Q

what are the advantages of international specialisation

A

economies of scale and efficiency
job creation
allows more international trade
revenue for the government
wider markets
consumer sovereignty

30
Q

disadvantages of international specialization

A

structural unemployment
overexploitation of resources
threat of foreign competition
risk of overspecialisation
strategic vulnerability

31
Q

how do changes in demand and exports and imports affect foreign exchange rate fluctuations

A

when a country’s import value is greater than the export(deficit), more currency is being supplied than demanded. the exchange rate for the currency will fall

if theres a surplus, the exchange rate will rise

32
Q

how does inflation cause foreign exchange rate fluctuations

A

if the inflation in a country is higher than that of other countries, the price of that countries goods in the international market will be higher
the demand for the country’s goods will fall so currency demand will fall, causing a fall in exchange rate

33
Q

how do changes in interest rates affect foreign exchange rate fluctuations

A

if a country’s interest rate rises, overseas residents may be keen to save or invest money in that country
demand for the currency will rise and the exchange rate will rise
if interest rates fall below that of other countries, currency will fall in value

34
Q

How do MNC’s cause foreign exchange rate fluctuations

A

investment in overseas production plants require the use of foreign currency

35
Q

how does speculation cause foreign exchange rate fluctuations

A

foreign exchange traders and investment companies move money around the world to take advantages of higher interest rates and variations to make a profit. can cause exchange rate fluctuations

if there is lack of confidence, demand will fall

36
Q

how does government intervention cause foreign exchange rate fluctuations

A

central banks can sell reserves in the foreign exchange market to increase its supply and cause a fall in its value

37
Q

what are the consequences of foreign exchange rate fluctuations

A

fall in the exchange rate causes import prices to rsie and export prices to fall
a rise in the foreign exchange rate causes import prices to fall and export prices to rise

38
Q

when will a fall in foreign exchange rate improve the trade balance

A

when the PED is elastic , a fall in foreign exchange rate will improve the trade balance by reducing the deficits as exports rise relative to imports

39
Q

when is a rise in the foreign exchange rate worsen the trade balance

A

when the PED is inelastic, a rise in the foreign exchange rate will worsen the trade balance as imports will rise relative to exports

40
Q

what is a floating foreign exchange rate

A

an exchange rate that is determined by market demand and supply conditions
will fluctuate regularly

41
Q

what is appreciation of currency

A

the rise in the value of one currency against others, on a floating foreign exchange rate

42
Q

what is depreciation of currency

A

the fall in the value of one currency against others is known as depreciation

43
Q

what are the advantages of floating exchange rate

A

automatic stabilization( any disequilibrium in BoP will be fixed by exchange rate)
frees up internal policy
insulated from external changes
government doesnt need to hold too much foreign reserves

44
Q

what are the disadvantages of floating exchange rate

A

uncertainty(investor lose confidence)
lack of investment( due to uncertainty)
speculation
lack of discipline( short term problems may be ignored until a crisis)

45
Q

what is a fixed foreign exchange rate

A

exchange rate that is fixed and controlled by the central bank
they will intervene in the market by buying and selling its currency in the foreign exchange market

46
Q

what is devaluation

A

a deliberate fall in the value of a fixed exchange rate

47
Q

what is revaluation

A

a deliberate rise in the value of a fixed exchange rate

48
Q

advantages of a fixed foreign exchange rate

A

certainty
stability encourages investment
keeps inflation low
Balance of Payments stability

49
Q

disadvantages of fixed foreign exchange rates

A

can conflict with other macroeconomic objectives
less flexibility
risk of overvaluation or undervaluation

50
Q

what is the Balance of Payments

A

the balance of payments is a record of all the monetary transactions between residents of a country and the rest of the world over a given period of time

51
Q

What are the components of the Balance of Payments

A

current account
capital account
financial account

52
Q

what does the current account record

A

visible trades(goods)
invisible trades(services)
net income recieved or made in payment for the use of factors
net current transfers(involves payments for non productive activities)

53
Q

what is a current account deficit

A

when the financial outflows in the current account exceed the financial inflows

54
Q

cause of a current account deficit

A

higher exchange rates( currency is overvalued, imports will be cheaper which increases imports. exports will become uncompetitive and there will be a fall in exports)
economic growth
decline in competitiveness
inflation
recession in other countries
borrowing money

55
Q

consequences of a current account deficit

A

low growth
unemployment
lower standards of living
capital outflow
loss of foreign currency reserves
increased borrowing
lower exchange rate

56
Q

what is the effect of low export growth

A

unemployment

57
Q

how can current account deficits be corrected

A

nothing because a floating exchange rate will correct it
contractionary fiscal policy
contractionary monetary policy
protectionist measures

58
Q

what is a current account surplus

A

when exports are more than imports

59
Q

what are the causes of a current account surplus

A

improved competitiveness
growth in foreign countries
high foreign direct investment
depreciation
high domestic savings rate
closed economy

60
Q

consequences of a current account surplus

A

economic growth
appreciation of currency
employment
better standards of living
inflation(demand pull)

61
Q

correcting a current account surplus

A

do nothing because a floating exchange rate will correct
expansionary fiscal policy
expansionary monetary policy
remove protectionist measures

Economics (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions