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Macro economics > The international economy > Flashcards

The international economy Flashcards

(66 cards)

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1
Q

Globalisation

A

the increasing intergration of economies internationally

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2
Q

characteristics of globalisation

A

free movement of capital and labour

free trade between goods and services between countries

availability of technology and intellectual capital

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3
Q

MNC

A

multi national company which function in a country other than the one of origin

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4
Q

causes of globalisation

A

trade liberalisation which is the removal of tariffs or restrictions

firms expanding oversees to exploit there economies of scale

growth in international trading blocs

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5
Q

How MNCs cause Globalisation

A

increase in MNCs in their growth and influence leading to more trade and investment

MNCs wishing to increase profits by an increase in FDI

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6
Q

Consequences of globalisation for developing countries

A

MNCs could exploit workers through low wages

Skilled workers leave to join for developed countries

increase investment

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7
Q

Consequences of Globalisation for developed countries

A

increased imports has a negative effect on the balance of payments

MNCs get access to cheap labour lowering production costs and prices

Cheap overseas production has led a reduction in certian industries for example due to cheap clothes in bangladesh it leads to a collapse in the text stiles industry

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8
Q

international trade

A

the exchange of goods and services between countries

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9
Q

advantages of international trade

A

increased competition

additional markets allow firms to exploit economies of scale

it can expose firms to new ideas and skills

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10
Q

disadvantages of international trade

A

higher transport costs

currency exchange has costs

regulatory and legal costs in oversees markets

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11
Q

Absolute advantage

A

when output of a product is greater per unit of resource of any country

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12
Q

comparative advantage

A

when the opportunity cost of producing a good is lower than the opportunity cost for other countries

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13
Q

terms of trade

A

is a countries relative price of exports compared to its imports

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14
Q

terms of trade index

A

index of average price of exports divided by index of average price of imports

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15
Q

free trade

A

international trade without restrictions such as tariffs and quotas

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16
Q

WTO

A

The world trade organisation helps trade be as free as possible it helps settles agreements and settle disputes

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17
Q

tariffs

A

is a form of tax on selected imports

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18
Q

quotas

A

they limit the quantity of a certain good which can be imported

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19
Q

embargoes

A

bans that are imposed on certain products

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20
Q

trade disputes

A

when one country or trading bloc is seen to be acting unfairly when trading internationally

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21
Q

Ad valorem

A

tax taking a percentage value of a good

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22
Q

costs of protectionism

A

restricts and reduces specialisation reducing efficiency

higher prices leading to higher inequality

reduces choice for consumers

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23
Q

trading blocs

A

are associations between different governments which promote and manage trade

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24
Q

Free trade areas

A

all barriers are removed between members can still impose barriers on outside countries like NAFTA

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25
Customs unions
these are free trade areas where standard tariffs are imposed on non members
26
Common markets
these are customs unions with the addition of free movement of factors of production between members
27
Monetary unions
members implement a single, common currency, therefore have a common monetary policy for example euro zone
28
tarriffs imposed on imports graph
if a fixed tariffs are imposed it increases prices from pe to p1 domestic demand reduces domestic supply increases consumer surplus reduces net welfare loss domestic producer surplus increases
29
reasons for changes in world patterns of trade
changes in comparative advantage with developed countries having high value products and developing countries having lower value products growth of trading blocs meaning increased trade between monetary unions increasing emerging economies have a big impact on trade
30
patterns of trade in UK
exports fall and imports rise decline in exports is due competition from emerging and new industrialised economies imports rise as goods are cheaper to buy from less developed countries
31
Balance of payments
records all flows of money into and out of a country
32
sections of a current account-trade in goods
trade in goods measure imports and exports of visible goods
33
trade in services-sections of a current account
measures imports and exports of services such as insurance
34
primary income-sections in a current account
the flows of money in and out of a country resulting from employment or earlier investment
35
secondary income
transfers are movements between countries who arent paying for goods and services and that arent investment
36
causes of a current account deficit
High levels of consumer spending on imports countries who cant compete internationally see a reduction in exports external shocks-rises in the prices of raw materials decrease in exports
37
causes of a current account surplus
low value domestic currency-exports cheaper and imports more expensive high interest rates-more saving,less spending in recession there will be a fall in imports and overall spending
38
consequences of BOP deficit
show that a economy is uncompetitive a deficit could bring a higher standard of living through imports fall in the value of currency leading to higher import prices
39
consequences of a BOP surplus
surplus shows a economy is competitive it could lead to a overeliance on exports could create inflationary pressure if the price of materials rise
40
Policies to correct a current account deficit
increase the price of domestic goods to increase exports and reduce imports restrictions on imports like tarriffs devalue or depreciate the currency making exports cheaper
41
Policies to correct a BOP deficit
raise the value of currency reduce the demand for exports and increase imports
42
global impact of correcting imbalances
supply side policies lead increase in world trade and growth restrictions on imports could lead to trade wars, reduction in international trade economic growth could be limited in developing countries reducing growth and efficiency
43
fixed exchange rates
where the government or bank sets the exchange rate
44
floating exchange rate
is free to move with changing supply or demand
45
How can government influence the exchange rate
devaluation of fixed exchange rate when exchange rate is lowered revaluation of exchange rates competitive depreciation or devaluation when the government deliberately lowers the exchange rate to be more competitive
46
floating exchange rate advantages
reduces the need for currency reserves help reduce a BOP current account deficit decreasing the exchange rate and increase exports
47
floating exchange rate disadvantages
make business planning difficult due to fluctuations fall in the exchange rate can lead to inflationary pressure
48
fixed exchange rate advantages
encourages FDI competitive pressures is on firms
49
fixed exchange rate disadvantages
difficult to maintain they lose control of the interest rates
50
How are floating exchange rates determined
they are determined by supply and demand increase in supply of pounds from s to s1 causes a decrease in value from p to p1 a decrease in demand from D to D1 causes a decrease in value from p to p1
51
Economic growth-economic development and growth
Increase in the size of a countries GDP
52
Economic development
making value judgements about what would make up a developed country
53
Measures of economic development
Real GDP per capita or real GNI(gross national income) per person its a measure of living standards with per capita being per person
54
GPI
genuine progress indicator is an economic indicator that gives a fuller picture of growth apart from GDP like quality of life
55
HDI
human development index is a attempt to describe peoples welfare and a countries economic development apart from national income figures like standard of living, health and education
56
factors that affect growth and development-poor infrastructure
poor infrastructure doesnt attract FDI, makes it difficult to be competitive like for example poor transport limits goods being transported
57
infrastructure
basic facilities and services
58
factors that affect growth and development-education
low education means a less productive workforce
59
factors that affect growth and development-investment
lack of investment means lower incomes lack of domestic investment means lower economic growth it can create a foreign exchange gap where outflows are greater than inflows
60
savings gap
the gap between domestic level savings and the investment needed to grow
61
limits to economic growth and development-absence of property rights
if people arent sure if they will keep their land then they may not invest in improvements to their homes harming development
62
limits to economic growth and development-corruption
corruption is when power is used for personal gain decrease in effiency as countries resources are diverted away unreliable bureaucracy which means the tax office is unable to collect taxes
63
policies to promote economic growth and development-Aid
aid is used as emergency relief during war or to promote development which is called development aid
64
Aid
the transfer of resources from one country to the other
65
promoting growth and development-free market strategies
inward strategies like import subsitution, subsidies, high exchange rates, nationalisation
66
promoting growth and development- free market strategies
less government intervention and more free trade, outward looking strategy to increase efficiency by freeing the market and removing subsidies, floating exchange rates

Macro economics (6 decks)

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