2.4.1 - 2.4.4 Flashcards
(25 cards)
Globalisation
Increasing interdependence of world economies
Open economies
Importing and exporting high proportion of used goods and services
Structural change
Production lowers when demand falls and vice versa
Technology change and international competition affect this
Foreign Direct Investment
FDI
Businesses expand into other countries
(Often HIC -> LIC)
(Lower wages = Cheaper production)
Outsourcing
Shifting production to another business to reduce input costs
Trade liberalisation
Limiting + reducing trade barriers
International capital flows
Large sums of money moved from one country to another
FDI/wealthy individuals moving to different bank/buying stores in foreign businesses
Multinational corporations
Transitional corporations
Businesses with interests in more than one economy can start off small but eventually dominate their market sector
Developed economies
High per capita incomes
Higher literacy rates
High life expectancy
Large service sectors
Developing economies
Lower incomes (usually) Weaker education systems Weaker welfare systems Abundant and cheaper labour Little capacity investment
Emerging economies
Eg. BRICS
(Brazil, Russia, India, China, South Africa)
Rising investment levels
Increasing production in secondary sector
International trade growing
Collaborate with MNCs
Purchasing Power Parity
PPP
Compares currencies when buying a basket of goods
Big Mac Index
Absolute advantage
When real resource cost of a product is lower in one county than in another
Comparative advantage
A country specialises in producing one good, trades with another country that specialises in another good to increase products in both countries
(Opportunity cost)
Free trade areas
Countries that trade freely with one another with few barriers and restrictions
Eg. NAFTA
The North American Free Trade Association
Canada, USA, Mexico
Eg. ASEAN
The Association of Southeast Asian Nations
Largest free trade area by population
3rd largest by GDP
Common markets
Free trade internally and a single unified trade policy for all member countries’ trade with the rest of the world
Single market
Member countries agree to harmonise regulations so that businesses compete on a level playing field
Eg. European Union (EU)
Economic Union
Adoption of similar economic policies by agreement within the union
Monetary and fiscal policies are not agreed
Trading Blocs
Trade is freer, easier, fairer
Varies from loose grouping to tightly built communities
Some agreement made between countries (bilateral agreements)
Floating exchange rate
Fluctuating exchange rates
Appreciation
When the exchange rate is rising due to increased demand or reduced supply
Depreciation
Falling values -> A unit of currency buys less
Eurozone
The group of countries where the Euro is their currency
SPICED
Strong Pound Imports Cheaper Exports Dearer
