Karteikarten
Econs
Karten in diesem Stapel (37)
- 1Government policies1. Free trade
2. Protectionism
3. Policy of cooperation & trade agreements - 2Trade- Exchange of goods/services between countries
- Intra/inter industry - 3Free TradeEconomic policy by which the government does not discriminate against imports from or export to other countries. there is an absence of government intervention, and trade takes place without any restricitions.
- 4Terms of TradeMeasure of the quantity of domestic goods that must be exported in return for a unit of imported good
- 51. inter-industry tradeTrade in products of different industries
- 6Reasons for trade (SS)1. Comparative advantage (states that mutually beneficial trade can occur between countries if one country has a comparative advantage at producing an item over the other, which means being able to produce at a lower opp cost)
- 7Dynamic Comparative Advantage1. Factor endowment
2. Capital accumulation + level of tech
3. International immobility of resources - 8Reason for trade (DD)1. The level of demand for a good is what determines who sells the good more cheaply (due to DD-SS mechanisms)
- 92. Intra-industry tradeA. Horizontal (product differentiation)
B. Vertical - 10Reasons for horizontal intra trade1. Differentiated products and differences in taste
2. Economies of Scale
3. Narrowing of technological gaps
4. Seasonality - 11Reason for vertical intra trade1. Comparative advantage based on factor endowment, extent of capital accumulation & technology to decide what component to specialise production in
- 12Trade PatternsRefers to the composition and volume of imports and exports, destination of its exports and the source of its imports
- 13Trade patterns in the real world1. DC vs LDC = offshore outsourcing + low/high value added goods
2. DC = horizontal intra trade to cater to the different needs
LDC = intra trade with product differentiation + inter trade with rising demand - 14Benefits of trade1. increase in welfare from higher levels of consumption
2. increase in welfare from greater variety of consumption
3. increase in welfare from lower domestic prices due to EOS
4. increase in welfare from lower price and better quality due to inc competition
5. engine of growth and structural change - 15"engine of growth and structural change"a. driver of actual growth
b. vent for surplus/ reach PPC
c. driver of potential growth
d. structural change- shift to production of higher value goods - 16"exposure to unfair competition"Dumping occurs when foreign producers sell their products at prices below their marginal production cost by making losses so that the prices of these foreign goods will be more competitive. aims to force domestic firms out to gain monopoly and reap supernormal profits = consumers worse off in the LR. it does not reflect CA
- 17Costs of trade1. dependance of other countries = macro instability
2. structural unemployment due to labour immobility
3. increased inequality of income distribution
4. exposure to unfair competition - 18Protectionismpartial or complete protection of domestic industries from foreign competition in domestic markets
- 19Methods of protectionism1. Tariffs (taxes levied on products when they cross national boundaries to protect infant industries/revenue)
2. Quotas
3. Subsidies (import/export) - for price inelastic demand
4. Voluntary export restraints
5. Exchange control (limiting the amt of foreign exchange leaving country, hence influencing imports)
6. Health and safety regulations - 20Benefits of protectionism1. correct temporary BOP deficit
2. counter 'dumping' and other anti-competitive actions
3. protect unemployment
4. develop infant industries
5. enable industry to decline gradually
6. protect the environment - 21Corresponding cost of protectionism1. retaliation by others
3. beggar thy neighbour = self defeating
4. complacency and uncompetitive + difficult to remove + inability to rightly identify
5. unnecessarily slowdown economic restructuring - 22Costs & benefits of protectionismPerspectives:
1. for consumers :)
a. low prices
b. more variety
c. employment
2. for producers :/
a. larger market accessibility
b. EOS
c. higher competition - 23Co-operation & Trade agreementsa. free trade areas
b. common market
c. customs union - 24Globalisationincreased integration of economies around the world through the movement of goofs, services, capital, labour and knowledge across international borders
- 25Aspects of economic globalisation1. trade integration
2. financial integration
a. lower cost
b. avoid barriers
c. ST (residents can spread out risk + producers can raise financial capital fast)
d. LT
3. international migration - 26outsourcing/offshoring (ST) /relocating (ST)1. offshoring: investing in plants in developing countries to produce the components they need
2. relocating: produce goods in another country and use their cheap labour - 27Causes of globalisation1. technological advancements
a. telecommunications
b. transportation
2. increasing liberalisation of trade and capital markets
3. reduction in capital controls - 28Measurement of openness(Import+Exports)/GDP
- 29Benefits of globalisationFor consumers (welfare):
1. increase in welfare due to higher consumption
2. increased welfare from more competitive exports and lower prices
3. increased welfare due to greater consumer choice - 30Benefits of globalisationFor producers (welfare)
1. improved efficiency for domestic firms (productive and allocative efficiency - from lessened cost and market power) - 31Benefits of globalisation1. driver of actual growth
2. driver of potential growth
3. increase in employment
4. curb inflation (both types) - 32Benefits of globalisationDifferent stakeholders:
1. small = overcome resource constraints
2. developing = potential growth + employment through offshoring for example
3. developed = increase production + employment when LDCs demand more (meet labour shortage)
4. developed: ageing population - 33Important details on benefits1. ST capital flows reduce i/r and increases I
2. LT capital flows helps the developing countries have access to more markets and also the firms who capitalise on lax env laws and cheap labour
3. migration allows labour scarce nations to lower COP and also increase PC (2 types of inflation) + helps labour surpluses in developing nations - 34Costs of globalisation1. microeconomic instability (including e/r fluctuations)
2. structural unemployment
3. imported inflation
4. slower economic growth
5. rising income inequality
6. environmental degradation (depends on the nation's priorities) - 35Costs of globalisationDifferent stakeholders:
1. managed float e/r
2. developed = outsourcing + cheap labour
3. developing = structural unemployment + brain drain (loss of productive capacity)
4. diff sectors of same country (low/high skilled) - 36Important details on cost1. i/r changes in one country are shocks to the macroeconomy of others = financial contagion
2. likelihood of a speculative attack is higher due to e/r fluxuations
3. however, if these loans have been put to productive use, then the negative impact is lesser s nations will be more able to repay the debts (wrt foreign loans)
4. Brain drain can be limitted if incomes are repatriated
5. increases of incomes of capital owners > decreasing/stagnating incomes of workers - 37Recomendations1. improve mobility of labour within the country to alleviate structural unemployment
2. implement income redistribution policies to improve equity and equality
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- Trade & Globalisation
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- 17A13 THAVEESHA DILUNI THENUWARA
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