Section B Macro Flashcards
(10 cards)
Assess the causes of globalisation
An1: Advances in technology, increased flow of information around the world
Ev1: Significant to tertiary / quaternary sectors more than primary / secondary goods
An2: MNC countries, increased flow of financial capital/workers/tech around the world
Ev2: Could be seen as a consequence rather than cause of globalisation
Discuss the impact of globalisation on worker wages in the manufacturing sector
An1: Higher wages in developing countries due to industries moving away from lower wage primary to higher wage secondary industries
Ev1: Jobs come with little security, MNCs move on when country develops and wages rise (jobs may have been dependent on the low wage rates)
An2: Fall in wages due to falling demand for manufacturing since manufacturing moves out of the country
Ev2: If developed countries move towards higher value tertiary / quaternary industries/ newer jobs have higher wages
Assess the possible problems of a country such as Kenya specialising in the export of tea and cut flowers
An1: Agricultural technologies have Volatile prices - drop in price harms value of exports, worsening trade balance and current account
Ev1: Depends on reason for drop in price, price falling due yo rise in supply, volume might rise proportionately, higher export revenues
An2: Primary commodities are lower value products, so limits the development of Kenya compared to specialising in higher value products
Ev: government could seek to develop new areas of comparative advantage in higher value industries
Assess the possible reasons why a country might impose tariffs on imports
An1: infant industry protection, developing comparative advantage in a higher value industry
Ev1: subsidies may be more effective than tariffs due to lack of international retaliation allowing the industry to compete abroad
An2: reduce a current account deficit, tariffs raise the price of exports to domestic consumers, so reduces spending on imports
Ev2: retaliation, other countries implement their own tariffs in response, export values may worsen, cancelling out any benefits
Assess the factors causing a change to the UK’s pattern of trade over the last 20 years
AN1: Leaving the EU, pattern of trade moves away from EU countries towards the rest of the world - particularly countries that the UK makes new trade agreements with
EV1: The pattern could revert back towards the EU in the future if the UK decides to rejoin the EU trading to some extent
AN2: Changing demand patterns from emerging economies - China and India’s growing development increases demand for UK eports, increasing the proportion to these countries
EV2: They still make up a relatively small proportion of trade - difficult to overcome the significance of local geography that encourages trade with closer economies
Assess the factors causing a change in China’s terms of trade
AN1: Exchange rate, a rise in the value of the Yuan would improve China’s Terms of Trade, imports become relatively cheaper, lower index of import prices, increase index of export prices, improving ToT
EV1: Exchange rates are volatile, recent changes can be cancelled out by future movements in the opposite direction
AN2: Rapid improvements in productivity, lower cost of production and lower index of export prices, worsening ToT for China
EV2: Although ToT are worsened, this will act positively for China’s competitiveness
Discuss the likely economic effects of ‘the European Commission applying high tariffs on Chinese mobile equipment entering the EU’.
AN1: Improvement in EU current account - raising price of imports to domestic consumers reduces overall value of spending on imports
EV1: Impact depends availability on non-Chinese alternatives - if there is a lack of substitutes then it is simply raining prices for consumers and costs for business
AN2: Improvement in the budget balance of the EU - tariffs generate revenue for EU
EV2: Tariff revenue is a very small proportion of overall tax revenue for EU governments, implying any effects on fiscal balances are likely to be insignificant
Discuss the causes of a current account deficit
AN1: Stronger currency, SPICED, imports become cheaper + more attractive to foreign consumers, +demand could increase the total value of imports
EV1: Depends on PED, inelastic demand (particularly SR) may mean less is spent on imports so current account can actually improve from a strong currency
AN2: Low productivity relative to trading partners makes exports less competitive over time and reduces demand for them, worsening the current account
EV2: Depends how much intra-industry trade a country has and how substitutable domestic goods are for foreign ones
Evaluate measures to reduce a current account deficit
AN1: Devaluation/depreciation of currency, SPICED, weaker currency makes imports more expensive which reduces the demand for them and reduces the total value of imports
EV1: J-curve, inelastic PED in SR, so consumers continue to buy imports and it will initially worsen the current account
AN2: SSPs, improve productivity, goods produced in the economy will be more competitive and increase demand for exports
EV2: These take a long time to take effect, so there may be no obvious immediate effect
Assess the factors causing a depreciation in the value of the pound sterling
AN1: a fall in demand for UK exports, less demand for UK pounds, which reduces its value
EV1: The resulting weaker currency will reduce the price of exports to foreign consumers, limiting the impact
AN2: A fall in UK interest rates, fewer hot money flows into UK since financial investors chase the best rate of return, as money leaves UK, it increases the supply of pounds which reduces its value
EV2: Depends on what is happening to interest rates in other countries, a similar drop in rates elsewhere would result in no incentive to move currency abroad
