Chapter 16: The nation in the world economy Flashcards Preview

Business Economics > Chapter 16: The nation in the world economy > Flashcards

Flashcards in Chapter 16: The nation in the world economy Deck (27)
Loading flashcards...
1
Q

Globalisation has caused a decline in price gaps

A

Declining price gaps can be seen for most goods and services. They are an indication of global integration of economies.

2
Q

Countries can specialise, becoming more efficient at a given type of products

A

This is cause comparative advantage.

If countries specialise in the production of goods and services in which they have a comparative advantage, trade expands the consumption possibility frontier, an effect similar to that of technological progress.

HOWEVER,

tariffs may impede this specialisation. Tariffs and other policies often impede this specialisation process, resulting in forgone mutual gains.

3
Q

Effect of tariffs on infant firms

A

If infant industries are temporarily subsidised or protected by tariffs, then firms can reduce costs over time as they benefit from learning by doing, economies of scale and economies of agglomeration.

4
Q

A countries comparative advantage depends upon

A

This depends on not only on the abundance of capital, labour, land and other resources but also institutions, culture, and public policy.

5
Q

Gains from trade and conflict

A

Both within and between countries conflicts arise over the distribution of mutual gains made possible by specialisation and trade.

e.g. Germany and China

6
Q

Roderick’s trillemma

A

This states that countries may not be able to simultaneously achieve complete globalisation, democracy and national sovereignty

7
Q

Globalisation effect of trade in different contexts.

A

Freer movement of goods and services and of capital may promote more rapid economic growth under some conditions but, under other conditions, may retard growth.

8
Q

Globalisation

A

A process by which the economies of the world become increasingly integrated by the freer flow across national boundaries of goods, investment, finance and to a lesser extent labour. The term is sometimes applied more broadly to include ideas, culture, and even the spread of epidemic diseases.

9
Q

Hyper globalisation

A

An extreme (and so far hypothetical) type of globalisation in which there is virtually no barrier to the free flows of goods, services and capital. See also: Globalisation.

10
Q

Specialisation

A

This takes place when a country or some other entity produces a more narrow range of goods and services than it consumes, acquiring the goods and services that it does not produce by trade.

11
Q

Comparative advantage

A

A country has comparative advantage compared to some other country in the production of the good for which it has the greatest absolute advantage, or least productivity disadvantage. See also: Absolute advantage.

12
Q

Price gap

A

Difference in the price of a good in the exporting country and the importing country. It transportation costs and trade taxes. When global markets are in competitive equilibrium, these differences will be entirely due to trade costs. See also: Arbitrage.

13
Q

Trade costs

A

The transport costs, tariffs or other factors incurred in trading between markets in two countries that mean that, for affected goods, the Law of one price will not hold across each market. See also: Law of one price.

14
Q

Arbitrage

A

The practice of buying a good at a low price in a market to sell it at a higher price in another. Traders engaging in arbitrage take advantage of the price difference for the same good between two countries or regions. As long as the trade costs are lower than the price gap, they make a profit. See also: Price gap.

15
Q

Globalisation I and II

A

Two separate periods of increasing global economic integration: Globalisation I extended from before 1870 until the outbreak of the first world war in 1914. Globalisation II extended from the end of the second world war into the 21st century. See also: Globalisation.

16
Q

Tariff

A

A tariff is a tax on a good imported into a country

17
Q

Current account

A

The sum of all payments made to a country minus all payments made by the country. See also: Current account deficit, Current account surplus.

18
Q

Current account deficit

A

The excess of the value of a country’s imports over the combined value of its exports plus its net earnings from assets abroad.

19
Q

Current account surplus

A

The excess of the combined value of its exports and net earnings from assets abroad over the value of its imports.

20
Q

Net capital flows

A

The borrowing and lending tracked by the current account. See also: Current account, Current account deficit, Current account surplus.

21
Q

Balance of payments

A

This records the sources and uses of foreign exchange.

22
Q

Gains from trade/ exchange

A

The benefits that each of two or more people gain from a transaction. See also: Economic rent.

23
Q

Foreign Direct Investment

A

Ownership and substantial control over assets in a foreign country. See also: Foreign portfolio investment.

24
Q

Foreign portfolio investment

A

The acquisition of bonds or shares in a foreign country where the holdings of the foreign assets are not sufficiently great to give the owner substantial control over the owned entity. Foreign direct investment (FDI) by contrast entails ownership and substantial control over the owned assets.

25
Q

Economies of agglomeration

A

The cost reductions that firms may enjoy when they are located close to other firms in the same or related industries. See also: Economies of scale.

26
Q

Learning by doing

A

This occurs when the output per unit of inputs declines with greater experience in producing a good or service.

27
Q

Infant industry

A

A relatively new industrial sector in a country that has relatively high costs, because its recent establishment means that it has few benefits from learning by doing, its small size deprives it of economies of scale, or a lack of similar firms means that it does not benefit from economies of agglomeration. Temporary tariff protection of an infant industry may increase productivity in an economy in the long run.