international economics Flashcards
(25 cards)
imports def
goods coming in to a country
exports def
goods going out fo a country
what is free trade
trade existing with no restrictions on the flow of goods and services between countries - no government intervention
example of a free trade area
the EU
what is an absolute advantage
a situation where a country can produce more of a good or service using fewer resources than that of another country
what is comparative advantage
where a country can produce a good at a lower opportunity cost to another country
how to find out comparative advantage
make ratios of what is produced - the country with the lower opportunity cost
comparative advantage on graph
axis with largest difference in PPFs - comparative advantage in that good (one on the outside)
the other country has the comparative advantage in the other good
limitations of comparative advantage
- assumes all FOPs are perfectly mobile - can switch anything to anything
- assumes opportunity cost rations remain unchanged - not true if efficiency changes in different industries
- depends on exchange rates
- assumes model of perfect free trade - no factoring in of protectionism
specialisation def
when economic units such as individuals, firms, regions or countries concentrate on specific goods or services
how do units get more efficient and effective at what the produce when they specialise
- greater understanding of the production process
- each unit can specialise at what they’re best at
- efficient use of time - no task switching
- technical EoS as capital is needed to produce g+s
advantages of specialisation
- allows for trade
- improved GDP
- EoS - lower costs
- greater consumer choice
- better quality goods
- interdependence - better relations between countries
disads of specialisation
- overreliance on industries and countries
- risk of structural unemployment
- reliance on other nations
- threat od external shocks or factors
- less developed countries may be prevented from moving into new sectors
ads of spec WITH trade
- increased global output as a result of comparative advantage
- greater competition - international borders opened
- employment opportunities - as labour is derived demand, and aggregate demand everywehre is increasing
- improved quality of g and s - increased competition and dynamic efficiency
disads of spec WITH trade
- over specialisation - may cause problems if the world’s demand falls
- structural unemployment - overspec can cause this if demand falls
- infant industries can’t grow - hard to compete with MNC or other lower prices
example of spec - Nissan
UK’s automotive industry like in Nissan – Sunderland branch producing hundreds of thousands of cars per year, tasks like installing engines
example of spec - NHS
NHS – division of labour in medical field – GPs, nurded, admin, specialists – 1.3 million people in employment in 2023 (MONOPSONY OF HEALTHCARE PROFESSIONALS AS WELL)
globalisation
process of increased interconnectedness and integration between countries
features of globalisation
- growth of international trade
- trade liberalisation
- enhanced mobility of labour and of capital
- increased cultural exchange
- increased international capitalism
- increased outsorcing
- falling transport costs
- growth of size and influence of MNCs
factors contributing to globalsiation
- trade agreements
- reduced tariffs and protectionism
- expansion of global trading blocs
- improved technology
- more globalised financial systems
how do trade agreements contribute to globalisation + example
- WTO assisted in redictino of trade barriers and there has been mroe trade agreements in the world - more interconnectedness
- Trade agreements promote globalisation by lowering trade barriers, increasing cross-border investment, and enhancing economic interdependence.
example: EU single market/USMCA
reduced tariffs and protectionism contributing to globalisation
- lower costs for imports and exports
- more free and frequent trade - mroe economic integration and global supply chains
- efficiency through speciaisation
- encourages competition
examples of trade liberalisation and contribution to globalisation
- China joining WTO and committing to reduce tariffs and open markets - massive FDI inflows, surge in global trade - became the world’s second largest economy, creation of millions of jobs and lifted 800mil out of poverty - became the ‘world’s factory’
- EU customs union - eliminated tariffs between members - free movement of goods, services, capital and labour - economic efficiency increased eg German cars and French agriculture
- India economic liberalisation - 1991 onwards - rapid integration into global economy, growth of IT and services sector and increased exports - grew the economy from 3-4% to 6-8%, became the world’s ‘back office’ and helped shape brics
global trade blocs impact on globalisation
- promotion of free trade and economic cooperation - deepening economic ties
