In class test (Ch35-42): Global Economics

Transportation, Communication, Technology, MNCs, Strong Institutions

International expansion of markets and trade, Lower prices, Higher consumer choice, Higher innovation, Higher quality products

Less domestic business, Transnational corporations dominate society, Cultures lose their individuality, Uniqueness replaced with brands, Higher economic inequality, Encourages big firms to seek cheap labour

A company that does business in many countries

Multinational company/corporation

Cross-border investment by a company with lasting and significant interest in a business in a foreign country.

Foreign Direct Investment

Larger market, Higher output, Higher employment, More competition, Higher innovation, Lower prices, Lower production costs, Higher choice

Less domestic business, Lower domestic employment, Environmental harm, No support for infant industries, Dependent for strategic products on foreign supply

Tariff, Quota, Subsidy

A tax on imports

A physical limit on imports

Money transfer from government to lower cost or encourage production

Selling at a price lower than cost in a foreign country

Protection of:

• Infant industries

• Declining industries

• Strategic industries

• Domestic employment

• Industries from low wage competition

To prevent dumping, To counter other forms of unfair foreign competition

Misallocation of resources, Could lead to a trade war, Higher priced imports, Reduced competitiveness

Shifts supply curve inwards

Shifts supply curve outwards

Negative (They pay the tariff, quantity decreases)

Positive (Price increases, quantity increases)

Negative (Price increases, quantity decreases)

Positive (recieves tariff)

Negative (Quantity decreases)

Positive (Quantity increases)

Negative (Less choice, price increases)

No impact

Negative (Quantity decreases)

Positive (Receives subsidy, lower costs, quantity increases)

Positive (Price decreases)

Negative (Pays subsidy)

Raise import price, imports fall, overall price falls

Quantity imported falls, Quantity demanded rises, Price rises

Quantity demanded rises, Quantity imported falls, Price falls

Most developed type of trade bloc (e.g. Gulf Cooperation Council)

Freer movement of labour and capital (e.g. Mercosur)

Common set of trade barriers on non-members (e.g. EU)

Completely free of trade barriers for members (e.g. NAFTA)

Removal of trade barriers on a range of (but not all) goods and services (e.g. India, Nepal, Mauritius, Chile)

Goods are cheaper, More consumer choice, Faster economic growth, Barrier-free (no tariffs), Reduced conflict

Financial cost to government and taxpayer, Firms merging and becoming too powerful, Countries start to rely on trade, Inequality between members

Trade Negotiations, Implementation and Monitoring, Settling trade disputes, Building membership

The WTO aims to reduce/eliminate trade barriers through negotiation (e.g. They encourage countries to draw up trade agreements on anti-dumping, subsidies, and product standards), They aim to bring about trade liberalisation

The WTO employs various councils and committees to administer and monitor the application of their rules (examining trade policies to ensure trade agreements are clear)

Countries bring their disputes to the WTO if they think their rights under the agreements have not been preserved

The WTO helps and encourages new members to join up (There are around 20 countries yet to join)

They promote peace, have constructive handling of disputes, have a rule-based system, Lower cost of living, Greater consumer choice, Boosts income and economic growth, Encourage efficiency and simplicity

Favours rich countries over poor countries, Favours corporations over workers, Poor countries do not have accurate representation, Rich-poor gap has been widening (which indicates rich countries benefit more), Agricultural subsidies in rich countries have a negative impact on the agricultural sector of poor countries, Harmful environmental effects

Decrease in manufacturing, Increase in imports, Increase in tourism, Increase in air travel

Increased dependency on commodities, Increase in FDI, Increase in emigration

Lower trade barriers

The value of a currency in another currency

Free market

Government

Both free market and government

A medium of exchange, A store of value, A unit of account

Imports and exports, Interest, Inflation, Speculations on currency

The price of imports increases, demand for imports decreases, imports decrease

The price of exports decreases, demand for exports increases, exports increase

Improves, as (X-M) increases

Increases, as (X-M) increases

Aggregate demand increases, GDP increases, Economic growth increases

Increases

Increases

Appreciate

Increases

Depreciate

Increases

Appreciate

Increases

Appreciate