Global economy

Created by

Angelina Andersson

Cards (42)

What is one benefit of international trade related to competition?
Increased competition between foreign and domestic firms decreases prices and increases choice
How does international trade facilitate resource acquisition for firms?
Firms can access resources globally
What is one financial benefit of international trade?
More foreign exchange earnings
How does access to larger markets benefit firms in international trade?
It increases revenue and allows for economies of scale
What is the effect of specialization in international trade?
More efficient resource allocation as countries specialize in their area of strength
How do domestic firms respond to international competition?
Domestic firms produce more efficiently to compete with global firms
What is protectionism?
Use of policies aimed at making domestic producers more competitive with foreign ones by limiting imports
What is a tariff?
An indirect tax on imports
What are administrative protections in trade policy?
Standards and regulations that increase costs for foreign producers
What is the purpose of administrative protections?
To protect the health, safety, and environment of the local country
What is economic integration?
Economic cooperation between countries and coordination of their economic policies
What are preferential trade agreements?
Agreements that lower tariffs to certain countries
What is a bilateral trade agreement?
An agreement between two countries
What is a regional trade agreement?
An agreement between two or more countries in a certain geographical region
What is a multilateral trade agreement?
An agreement between two or more countries under guidelines set by the WTO
What are the types of trading blocs?
Free trade area: Remove tariffs and quotas among members.
Customs union: Free trade among members with common external tariffs.
Common market: Customs union with free movement of goods, services, capital, and labor.
Monetary union: Common market with a common currency managed by a single central bank.
What is one pro of trading blocs related to market access?
Increased market access allows economies of scale
How do trading blocs affect labor freedom?
Increased freedom of labor increases employment opportunities
What is a political benefit of trading blocs?
Increased political stability and cooperation
What is a potential con of trading blocs regarding efficiency?
Potential loss of world efficiency
What is a con of trading blocs related to sovereignty?
Loss of sovereignty
How can trading blocs affect employment in certain industries?
Increased unemployment in infant and sunset industries
What is a financial con of trading blocs?
Less tariff revenue
What is one advantage of a monetary union related to exchange rates?
Exchange rate certainty
How does a monetary union affect cross-border investment?
Increased cross-border investment
What is a financial benefit of a monetary union regarding transaction costs?
Lower transaction costs encourage trade and investment
What is price transparency in the context of a monetary union?
It allows consumers to easily compare prices across member countries
What is a disadvantage of a monetary union related to economic sovereignty?
Loss of economic sovereignty, less flexibility with macroeconomic policies
How does a monetary union affect the use of exchange rates for economic problems?
Unable to use the exchange rate to combat specific economic problems
What is a limitation of centralized monetary policy in a monetary union?
Centralized monetary policy has asymmetric impacts
What are the objectives of the World Trade Organization (WTO)?
Encourage free trade, allow for transparent trade, fair competition, promote sustainable production
What are the functions of the World Trade Organization (WTO)?
Trade negotiations, monitor trade, dispute settlements
What is a limitation of the World Trade Organization (WTO) regarding agreements?
Difficulty reaching agreements
What is a limitation of the World Trade Organization (WTO) related to bargaining power?
Some countries have unequal bargaining power
What is a limitation of the World Trade Organization (WTO) regarding enforcement?
Limited capability to enforce rules
What is an exchange rate?
The value of one currency in terms of another currency
What is a floating exchange rate system?
Determined by market forces
What is a fixed exchange rate system?
Pegged to an exchange rate of another currency
What is a managed exchange rate system?
Allowed to float with some intervention from the central bank
What does appreciation mean in terms of exchange rates?
Exchange rate of one currency has risen against another currency