4A

Question 1

Globalisation

Answer 1

The process of increased integration and interdependence of the world economies.

Question 2

Causes of globalisation

Answer 2

-Trade blocs
-Technology-travel and communication
-Population and migration
-TNCs and global supply chains
-Specialisation and exchange
-Containerisation

Question 3

Positives of Globalisation

Answer 3

-Cheaper labour for businesses
-easier to export for economy’s
-freely movable labour
-decreased price for consumers
-job creation
-enlarged markets= increased tr
-reduced costs-fop
-offshoring and outsourcing
-higher tax revenues-corp tax

Question 4

Negatives of Globalisation

Answer 4

-Monopolies=increased price for consumers
-labour exploitation-low wages and poor working conditions
-Jobs losses through structural u
-

Question 5

Absolute Advantage

Answer 5

the ability to produce output using fewer resources than another country

Question 6

Competitive Advantage

Answer 6

the ability to produce output at a lower opp cost than another country.

Question 7

FTA

Answer 7

elimination of trade barriers

Question 8

Customs Union

Answer 8

eliminations of trade barriers and also a common external tariff agreed.

Question 9

Common markets

Answer 9

free movement of fop

Question 10

Economic union and monetary union

Answer 10

shared currency

Question 11

Positives of joining a FTA

Answer 11

-consuners choice-lower prices-high sol
-cheaper abd increased access to resources-lower production costs-enlarged markets-increased rev
-increased x- ad increased- tax rev

Question 12

Negatives of joining a FTA

Answer 12

-uncompetitve firms exposed to increased competitions- cant be protected by tariffs, loss of d and rev
-If net importer m incrased=ad decreased.

Question 13

Positives of joining a monetary union

Answer 13

-more stable currency
-eliminates exchange rate risks eg spiced
-eliminates conversions costs
-competitive firms can gain from price transparency

Question 14

Negatives of joining a monetary union

Answer 14

-uncompetitive firms cannot hide behind exchange rates
-loss of monetary polices

Question 15

Protectionism

Answer 15

Any method used by government to restrict international trade, usually imports.

Question 16

Ways of protecionism

Answer 16

-embargos
-tariffs
-subsidies domestic
propaganda
-regulation + red tape
-quotas no of M

Question 17

Why protectionism

Answer 17

-reducing m and increased consump ad increased
-protecting domestic firms
-demerit goods
tax rev from tariffs

Question 18

Tariff

Answer 18

tax on imported goods/services

Question 19

reasons for tariff

Answer 19

-to protect domestic jobs and stop structural u
-supply domestic economic growth
-govt revenue
-response of dumping

Question 20

reasons against tariff

Answer 20

-Welfare loss for consumers
-Higher costs for importers
-retaliation
-world multiplier effect from reduction in trade
-import cushions may cause domestic firms to stop striving for efficiency

Question 21

x change rates

Answer 21

the cost of one currency in terms of another

Question 22

Whats a floating x rate

Answer 22

determined by d and s

Question 23

D for currency determined by

Answer 23

-demand for x
-IR, positive relationship with x rate due to hot money theory-individuals seeking best rate of return.
-FDI from abroad

Question 24

S for currency determined by

Answer 24

-D for M
-Buying foreign assets

Question 25

Depreciation

Answer 25

weakening or falling in value
WPIDEC
-x increases, M decreases, AD increases
-costs push inflation for imported goods.
-improvement of current account

Question 26

Appreciation

Answer 26

Strengthening
-SPICED
-X falls, M rises
-AD falls
-exporting firms struggle with competitiveness
-worsening of current account

Question 27

Evaluation for x rates

Answer 27

-PED for x or M
-Trade restrictions
-WPIDEC- Less money leaving more money entering.

however, if ped is inelastic in sr then unresponsive firms consumers may not reduce demand for m and d for x, due to contrac6ts between firms, buying habits. CA will worsen in sr as m are more expensive. more money leaving

Question 28

Two ways govt can manipulate currencies

Answer 28

-Buying other countries currencies
govt buy assets, supply of own currency increased, supply in market. however spend a lot of money.
-Reduce IR
=hot money theory, d for currency reduced

Question 29

balance of payments

Answer 29

record of all monetary flows between economies.

current account
capital account
financial account

Question 30

Current account made up of

Answer 30

Trade in goods
trade in services
primary income
secondary income

Question 31

Causes of CA deficit

Answer 31

SPICED
recession
non competitveness

Question 32

Macro effects of CA deficit

Answer 32

-fall AD
-WPIDEC can cause cost push inflation

Question 33

remember

Answer 33

increased ir, increased d for pound, SPICED

decreased ir, decreased d for pound, WPIDEC

Question 34

Trade creation

Answer 34

Increase in economic welfare from the removal of tariffs. gain in consumer surplus

Question 35

Trade diversion

Answer 35

when tariff agreements cause imports to shift from low cost countries to high cost countries.

Question 36

Terms of trade

Answer 36

Country’s exports prices in relation to its import prices

Question 37

International competitiveness

Answer 37

ability of a nation to sell is x successfully

Question 38

factors affecting competitveness

Answer 38

-x change rates
-productivity
-taxation

Question 39

ways to increase comp

Answer 39

-ss policies in education-productivity, reduced costs, better quality. however time lag
-x change rates WPIDEC, buy foreign assets, increasing S of currency. Reducing IR, lower hot money, lower demand for currency depreciation, x cheaper. hwoever costs push L from imports dearer. demand pull inflation form x
-IR, increased IR, consumption down, PL down due to ad down.
however SPICED due to hot money, ad down, lower gdp, less jobs.