Week 7 International trade and Globalisation Flashcards
Define Exports?
Domestically produced goods and services leaving the country to be sold abroad
Define Imports?
Foreign goods and services brought into the country to be sold domestically
What are Net Exports?
Net Exports can be defined as when the trade balance is equal to the value of exports minus the value of imports (X-M)
What variables influence net exports?
5 Points
1) Consumer preference
2) Price (Domestic vc Foreign)
3) Incomes
4) Exchange Rate
5) Government Policies
Explain Trade Surplus and Deficit?
1) Net Exports measure the imbalance in a country’s trade in goods and services
-Trade Deficit: An excess of imports over exports
-Trade Surplus: An excess of exports over imports
-Balanced Trade: When Exports = Imports
Define Closed Economies?
A Closed economy is an economy that does not interact with other economies in the world
What is an open economy?
An economy that interacts freely with other economies around the world
How can Protectionism be implemented and what types are there?
3 Types
1) Protectionism can be implemented through both direct and indirect trade barriers
2) The types of Protectionism are:
-Tariffs (Duties) on imports and exports- apply directly
-Imports Quotas
-Voluntary export restraints (VERs)
How can Non-Tariff barriers be used as government policy?
Local content requirements can acts as an indirect barrier
How can subsidies be used as government policy?
Subsidies towards local producers that are funded by public funds (these export subsidies can distort world markets)
How is the flow of capital measured?
1) Net Capital outflow (NCO) also known as net foreign investment
2) Calculated by:
Domestic residents purchase of foreign assets - foreigners purchase of domestic assets
What does it mean if the NCO value is > 0?
Domestic purchases of foreign assets exceed foreign purchases of domesitc assets, thus a capital outflow occurs
What does it mean if NCO < 0?
Foreign purchases of domestic assets exceeds domestic purchases of foreign assets thus a capital inflow occurs
What variables influence NCO?
1) Real interest paid on domestic assets
2) Real Interest rates paid on foreign assets
3) Perceived risks holding foreign assets
4) Government policies affecting foreign ownership
Explain export-oriented manufacturing?
1) Countries with low cost and abundant labour have promoted economic growth based on supply chains that are attracted by FDI in areas such as electronics and textiles
-Main example would be China’s developmental model where as China’s growth slowed, other emerging countries such as India have increased manufacturing or exports to take advantage of it
