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Economics > Chapter 14 > Flashcards

Chapter 14 Flashcards

(52 cards)

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1
Q

Define globalisation

A

Process of increasing economic integration of the worlds economies

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2
Q

Examples of globalisation

A

UK dealing with customers through call centres in India

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3
Q

Main characteristics of globalisation

A
  • Growth of international trade and reduction of trade barriers
  • Greater international mobility of capital and land
  • Increase in power of Multi national corporation
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4
Q

Consequences of globalisation on less developed countries

A

Forced to work in low skilled jobs

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5
Q

Define less developed countries

A

Countries considered behind in terms of their economy, human capital, infrastructure and industrial base

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6
Q

Consequences of globalisation for more developed countries

A

MNCs reduce wages and standards of living.

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7
Q

Define more developed countries

A

Countries with high degree of economic development, high average income per head, high standards of living

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8
Q

What is the dependency theory of trade and development

A

Developing countries have little capital compared to developed countries.
Developed at an advantage to developing:
-Greater material and better quality

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9
Q

Is globalisation good

A

Yes for rich

No for poor

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10
Q

What is more internationally mobile- Manufacturing or service

A

Until recently it was manufacturing

Now service because can do calls for example

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11
Q

4 factors encouraging overseas location of call centres

A

-Highly reliable
-Low wage
-24 hour employment
-Fluent in English
But lack british culture

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12
Q

What does globalisation do to the power of governments

A

Reduces it, especially in smaller countries

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13
Q

Define MNCs

A

Multi national corporations- businesses operating in several countries

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14
Q

Role of MNCs in globalisation

A
  • Increased trade
  • Broken down production of specialised workers globally
  • Long term investment (Movement from developed countries to developing) of advanced technology
  • Higher wages
  • Consumer choice has widened with multiple MNCs
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15
Q

Define absolute advantage in regards to trade

A

Country has an absolute advantage of it can produce more of a good than other countries from the same amount of resource

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16
Q

Define comparative advantage in regards to trade

A

The country with the least opportunity cost when producing a good has a comparative advantage in that good

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17
Q

Assumptions for comparative advantage

A
  • Factors of prod are fixed between countries
  • Constant returns to scale
  • Demand and cost conditions are stable
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18
Q

Define quotas

A

Physical limits on the quantities of imported goods allowed into a country

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19
Q

Define tariff

A

Tax imposed on imports from other countries entering

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20
Q

Define export subsidies

A

Money given to domestic firms by the gov to encourage firms to sell their products abroad

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21
Q

What is the argument supporting free trade

Study These Flashcards
A

placing controls restrict countries from specialising in activities in which they have comparative advantage

22
Q

Explain the infant and sunset theory

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A
  • Infant; countries with in industries more productively efficient have more returns to scale so have competitive advantage. Controls are in place to protect new industries from established rival ones
  • Sunset industries: Protect older industries from competition from infant
23
Q

Against overspecialisation

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A
  • Agriculture monoculture

- Country can become very vulnerable to changes in demand

24
Q

Draw consumer and producer welfare in an open and closed economy

25
How does comparative advantage change
Through adjusting where manufacturing takes place
26
Types of trading (economic integration)
- Preference areas (countries agree on certain trade) - Free trade areas( abolish of tariffs) - Customs unions (free trade but protected by common external tariff barrier)
27
Define euro zone
Group of EU countries that have replaced their national currencies with the euro
28
What is the balance of payments
Record of all the currency flowing in a out of a country at a particular period
29
3 main kinds of balance of payments accounts
- Current account - Capital account - Financial account
30
Define the three kind of balance of payments
Current account- flow of currency in and out of a country Capital account- transfers of income Financial account- Part of the balance of payments recording capital flowing in and out of a country
31
What are the four components of the current account
-Balance of trade in goods -Balance of trade in services Balance of primary income and balance of secondary income (transfers)
32
Explain the balance of trade in services, current account
Exports vs imports
33
Explain the balance of trade in services, current account
Payments for services in vs out
34
Difference between primary and secondary income
Primary: made up from net flows between countries Secondary: made up of gifts, donations between countries
35
What is capital flow
Movement of money for purpose of trade, or business operations
36
What is foreign direct investment
Investment in capital assets in foreign countries
37
What is portfolio investment
The purchase of one countries securities (e.g bonds)
38
What is hot money capital flow
Moving money between currencies to make money
39
What does an increase in exports do to the economy
Increase in AD occurs, as there is an increase in real national income
40
What is export led growth
Short run economic growth due to an increase in exports. Long run due to growth and increase in international competitiveness
41
Problems with current account defects
-Beneficial in short run due to increase in imports -causes uncompetitiveness in countries industries In developing countries defect can be understood through low capital goods
42
Disadvantages of current account surplus
- One countries surplus is another’s deficit | - Surplus can be inflationary, demand pull inflation
43
3 factors influencing a countries current account deficit
- Productivity - Inflation - Exchange tate
44
Policies to reduce balance of payments deficit
- Deflationary policy - Direct control (import control) - Devaluation (lowering exchange rate)
45
Explain what is meant by expenditure-reducing policy
Balance of payments defecit | Gov policy reducing AD of imported goods
46
Explain what is meant by expenditure switching policy
Balance of payments deficit | Switching demand from imported goods to domestically produced goods
47
Explain deflation as a policy to reduce balance of payments deficit
Reduce AD contractionary monetary or fiscal policy
48
Explain direct controls as a means of reducing balance of payments deficit
Imposed quotas or bans on imports to make more individuals buy domestically produced goods. Welfare is decreased
49
Explain devaluation as a way of reducing the deficit of the balance of payments
Increasing price of imports compared to exports
50
Difference between depreciation, devaluation and downward float
Depreciation: Fall in external value of a currency | Devaluation and downward flow lay: more units are needed to buy a unit of another country
51
What is consumer led growth
Imports sucked into a country, not sustainable
52
Government policies to reduce balance of payments surplus
Three R’s - Reflating demand - Reducing import control - Reduce global payment imbalances

Economics (15 decks)

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