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- 1Globalisation is the ever, increasing integration of the world's local regional and national economies into a single, international marketInvestment is the total spending of a firm has spent on capital goods
- 2features of globalisation More trade occurs Brands develop globally across the world Migration more countries in trade Rise of low cost nations (India, china) Countries more interdependentFactors of globalisation
Trade in goods
Efficient forms of transport
Some developing countries have cost adv of cheap labour
Growing strength and influence - 3Consequences of globalisation - producers can make avg cost lower by going to places with cheap labour - workers can take adv of job opportunity across the globe rather then their home country - environment industrialisationEconomic growth the increase of a country's real national output
Economic development refers to living standards, freedom (from oppression) and life expectancy - 4Human development Index - Education (mean years of schooling and expected years of schooling) - Life expectancy Norway (0.957) Niger (0.377) Uk (0.932)Dis HDI
HDI doesn't consider how free people are politically, their rates ...
HDI does not take environment into consideration
HDI does not consider distribution of income (Israel) - 5Adv HDI allows for comparison between two countries Education and health are important development factors to considerFactors growth and development
Market strategies these are measures which make the economy more free with less gov interve
Trade liberations - free trade is the act of trading between nations without protectionist barriers - 6The role of aid finance infrastructure (transport, energy access, economies of scale) Promoting trade (improve exports capacity or reduce trade barriers) Building human capital flight (education + healthcare builds skilled workersEval aid
Other factors such as good governance, political stability
Aid dependency
Aid should be used on its intended purposes - 7J-curve SR- firms are tied into financial contracts therefore value of exports (decrease) due to value of $(D) and imports (^) LR- firms are no longer tied down by contracts and since $ down exports (^) and imports (D) balance of payments improvesCustom unions when a group of countries agree to have free trade amongst themselves and agree on a common external tariff to countries outside that zone e.g. EU
- 8Main features of a custom union common external tariff free trade within the union coordination of trade policies loss of sovereignty due to coordinating trade policiesTrade creation occurs when a country consumes more imports from a low cost producer and fewer from high cost
trade diversion occurs when trade shifts to a less efficient producer - 9Monetary policies Monetary policy is the central bank’s action to establish economic stability in a nation and fulfil other goals like unemployment, inflation, price instability, recession, etc.Main macro economic objectives
Economic growth
Low inflation (2% +/-)
Low unemployment / Full employment
Current account balance of payments
Low gov borrowing
Exchange rate stability - 10Difficult to control many objectives with one tool – interest rates. For example, a rise in oil prices causes cost-push inflation and lower growth. The Bank could increase interest rates to reduce inflation, but, it would cause economic growth to fall as well. In 2009, inflation rose to rising oil prices, but the economy was also in recession; the Bank decided to ‘allow’ the temporary inflation and concentrate on economic recovery.Liquidity Trap – This occurs when a cut in interest rates fail to stimulate economic activity. e.g. because of low confidence or banks don’t want to pass base rate cut onto consumers
- 11Quantitative easing is a monetary policy strategy used by central banks, such as the Federal Reserve, to increase the money supply and stimulate economic. central bank buys government bonds and other financial assets, such as mortgage-backed securities, from financial firmsFactors affecting exchange rate
Inflation - If inflation in the UK is relatively lower than elsewhere, then UK exports will become more competitive, and there will be an increase in demand for Pound Sterling to buy UK goods. Also, foreign goods will be less competitive and so UK citizens will buy fewer imports - 12Avoids currency fluctuations (stability) Encourages firms to invest Incentive to keep inflation low Avoids devaluationConflicts with other macro-objectives
Less flexibility
current account imbalance
May require higher interest rates - 13Stability encourages investment. The uncertainty of exchange rate fluctuations can reduce the incentive for firms to invest in export capacity. Some Japanese firms have said that the UK’s reluctance to join the Euro and provide a stable exchange rate makes the UK a less desirable place to invest. A fixed exchange rate provides greater certainty and encourages firms to invest.If a currency is under pressure and falling the most effective way to increase the value of a currency is to raise interest rates. This will increase hot money flows and also reduce inflationary pressures. However higher interest rates will cause lower aggregate demand (AD) and lower economic growth, If the economy is growing slowly this may cause a recession and rising unemployment.
- 14Supply side policies Education, Vocational training, Health spending,subsidies Deregulationn,privatisation,income tax cuts,free trade agreementsStability in balance of payments
foreign exchange is unrestricted
market efficiency is enhanced
large foreign exchange reserves are not needed - 15restricted economic growth The lack of control over floating exchange rates can limit economic growth or recovery. The negative currency exchange rate movements may lead to serious issues. if the dollar rises against the euro, it will be more difficult to export to the eurozone from the U.S.
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- Karteikarten am Ohne Titel, erstellt von t t am 15/05/2024.
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