Term
| Overview of world economy |
|
Definition
240 countries
Trade, Capital flows, migration, policies
World GDP (2011): $69.11 Trillion
US: $15.08 trillion |
|
|
Term
|
Definition
Developed Countries
EU, China, US, Japan |
|
|
Term
|
Definition
Developed countries trade mostly with each other
Less-developed countries trade with developed countries |
|
|
Term
| What does the world trade |
|
Definition
1. Agriculture
2. Fuels and mining
3. Manufactures |
|
|
Term
|
Definition
| Increasing world-wide integration of markets |
|
|
Term
| Advantages of globalization |
|
Definition
Increase global development (technology, FDI,
Global competition and cheap imports keep prices constrained and prevent inflation
Reduce wage gap (firms are forced to high women in order to remain competetive) |
|
|
Term
| Disadvantages of Globalization |
|
Definition
| Certain groups are not benefitted because their industries lack comparative advantages |
|
|
Term
| First Wave of Globalization |
|
Definition
1870-1914
Falling tariffs
improved transportation |
|
|
Term
| Second Wave of Globalization |
|
Definition
1945-1980
Lower trade barriers (again)
specialization
poor nations left behind |
|
|
Term
| Third wave of globalization |
|
Definition
1980 -present
Growth of emerging markets
International capital movements regain importance |
|
|
Term
|
Definition
zero sum game: countries gain by specializing
Reduced domestic employment - only specific industries suffer
Restrictions are beneficial |
|
|
Term
|
Definition
| Trade surplus (exports>imports) would lead to a nation obtaining more gold which would increase domestic production and employment |
|
|
Term
| Price Specific Flow Doctrine |
|
Definition
David Hume
- Trade surplus is only possible in the short run
- Inflow of gold will increase domestic prices
- higher domestic prices will increase imports
|
|
|
Term
|
Definition
Adam Smith
- Trade is beneficial when each country is a least cost producer
|
|
|
Term
|
Definition
| Countries should specialize in production of goods that they are relatively more efficient at making |
|
|
Term
|
Definition
Slope of the PPF Curve
Marginal rate of substitution
ΔGood Y/ΔGood X |
|
|
Term
|
Definition
J.S. Mill
Determined by relative strength of demand for other nations products
Termos of Trade =
(Export price index/import price index)*100 |
|
|
Term
|
Definition
| As countries trade more their overall welfare increases |
|
|
Term
|
Definition
Reduced costs
increased exprts to countries w/ more jobs
higher level of earnings reinvested into domestic economy |
|
|
Term
|
Definition
| Reduced employment in specific industries, lower wages for unskilled workers |
|
|
Term
| Critiques of comparative advantage |
|
Definition
| Can't determine efficiency rating of goods that countries are inefficient at producing because they don't actually produce them |
|
|
Term
| Sources of comparative advantage |
|
Definition
Factor endowment
Technology
Demand
Scale Economies |
|
|
Term
| Techonological source of comparative advantage |
|
Definition
David Ricardo
Advantage may be lost over time
- transfer to other companies
- progress makes earlier inovations obsolete
|
|
|
Term
| Demand as a source of comparative advantage |
|
Definition
| High demand for limitedly available goods creates high prices and increases imports |
|
|
Term
| Economies of Scale as a source of comparative advantage |
|
Definition
ATC falls as output rises
Lower costs for larger countries
Imperfect competition is created due to large firms |
|
|
Term
| Factor Endowment/Heckscher-Ohlin Model |
|
Definition
Certain countries are more endowed in:
Countries specialize in goods that utilize their abundant factors |
|
|
Term
|
Definition
The US (a capital intensive country) exports more labor intensive goods than capital intensive goods.
Caused by differences in technology. The US has more skilled labor (expand the definition of capital) |
|
|
Term
| Stolper Samuelson Theorem |
|
Definition
Real price of a country's abundant factor rises due to trade
Real price of scarce factor falls - losers
Increased inequality from trade |
|
|
Term
|
Definition
Krugman
Assumes: imperfect competition, increasing returns to scale, product differentiation
- countries export the same goods to each other (cars)
- Countries may lose from trade (countries forced to specialize in industries w/ decreasing returns to scale
- more reasons for countries to gain from trade
- Motivates policymakers to affect trade
|
|
|
Term
|
Definition
| More productive firms are larger and gain more profits |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
