The Global Economy (3)

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  • Created by: kkwaters
  • Created on: 02-02-17 18:12
Purchasing power parity
Figures that have been calculated to reflect the purchasing powers of incomes. They are not disturbed by variable exchange rates.
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Industrialised economies
Benefit from the increase in productivity that occurs when many people move from the agricultural sector into the manufacturing sector
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Technological transfer
When MNC's locate in developing countries. the foreign company trains people in the skills they needed to implement the new technologies. In time employees move to other business where they provide training for others.
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Open Economy
Exports and imports form a significant proportion of GDP. there will also be capital movement both in and out of the country and technology transfer.
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Index number
Show relative changes so that we can make easy comparisons. (value to be converted/value of base) X 100
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Current prices
apply to data given at the price levels in the year concerned
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Real value
measure of money value with the effect of inflation removed. (Nominal value X 100/ Price Index)
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Constant prices
Measured from a base year. Data would provide an accurate measure of GDP, not distorted by inflation.
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Nominal Value
Value at current prices
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Trade Barriers
E.g Tariffs ( tax on imports), Quotas ( set a limit on imports for specific products) They make trade difficult and reduce the amount of trade.
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Comparative advantage
Why the global economy will be better off if all countries trade freely. Why countries should specialise in G/S they can supply most efficiently
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Competitive Advantage
How countries specialise in the products they can supply giving the best value for money.
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Reshoring
Occurs when some manufacturing processes that were outsourced to low wage economies are brought back to the economies where their parent companies are located.
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Intermediate goods
Manufactured inputs to the production process.
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Supply chain
Sequence of different processes required to make a finished product. The entire process may be carried out in one place by one firm, or certain stages in the process may take place in a different business or a foreign economy.
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Digital Data
Information distributed electronically. the capacity to deliver complex instructions to people or to machines is changing patterns of trade.
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Import controls
Any regulations to create barriers to trade
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Non- Tariff barriers
Quotas and technical restrictions. gov can set specific safety or other regulations that exporters are forced to comply with, increasing their production costs.
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Trade creation
Occurs within a trading bloc when trade between members increases because trade barriers are reduced/abolished.
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Trade diversion
When buyers in a trading bloc reduce imports from non member countries, switching instead of tariff free products from member countries.
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Common external tariff
A single set of tariffs that apply to all imports from outside the EU into all EU member countries.
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Free Trade Areas
Groups of countries that trade completely freely with each other, with no trade barriers. Each member retains its own independent trade policies in relation to the outer world.
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Customs Union
Have internal free trade and agree common policies covering trade with the rest of the world
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Common markets
Have completely free trade internally and a single unified trade policy covering all members countries' trade with the rest o the world ( CET) Also free movement of people and capital.
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Single markets
One stage beyond common markets. They remove all barriers to the movement goods, labour and capital between member countries. They also aim to facilitate trade in services.
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Protectionism
Controls imports so as to protect domestic producers from international competition
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Dumping
Exporting at a price that is less than the true cost of production
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Infant industries
Don't have EoS. Whilst developing they are sometimes protected from overseas competition by tariffs, less pressure= less efficien Some prospect of profitability in the long run, provided they are given protection in the short run as they get started
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Strong currency
Imports cheap, exports expensive = buys more of any foreign currency
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Market saturation
When it becomes impossible to expand sales further in that particular market. If the product is a durable good, it may be possible to sell replacement goods, but growth will be difficult
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Offshoring
Locating production process in a foreign economy where costs are low. Either investing in the low cost location, building and running a factory or simply getting another foreign business to do it.
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Supply Chain
Sequence of processes which starts with acquiring the most basic inputs and ends with delivery of the product to the customer.
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Outsourcing
Buying inputs from independent suppliers, either abroad or domestic.
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Global Marketing
Marketing strategies used by businesses when operating in a global market. Elements of the marketing mix may be the same or varied to suit a particular part of the global market
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Glocalisation
Global good/service is more likely to succeed if it is adapted to the specific requirements of local practices and cultural expectation
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Ethnocentric model
Approach to marketing where business approaches the world primarily from the perspective of its own culture. It assume that what was a success story in the domestic market will also be so in other economies. Products sold without adaption.
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Polycentric Model
Considers each host country to be unique. Subsidiary businesses develop their own individual business and marketing strategies in order to suit particular needs.
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Geocentric Approach
Sees the whole world as a potential market but with both similarities and differences in domestic and foreign markets. An effort is made to develop integrated work market strategies to gain the best from both of these strands.
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Reverse Innovation
Designing a product that is less complex than existing models so that it can be sold in mass markets where incomes are lower that they are in developed economies.
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Social and cultural differences
Individual groups within them may have a distinctive way of life. this will affect patterns of consumption and the products they favour. Will also affect the way they do business with each other.
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Joint Venture
Businesses in a collaborative relationship with a local producer. They are of particular value to businesses that want to produce or sell in an unfamiliar market. Can be used to spread risks.
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Subcultures
Groups of people who have interests and values in common. Online selling makes it easy for buyers to find what they want.
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Global market niches
Smaller, specialised parts of a global market where customers in more that one country have particular needs that are not fully met by the global mass market.
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Multiplier effect
A bigger chance in overall economic activity stimulated by an initial injection. Investment can lead to ME.
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Technological transfer
adoption of efficient technology from abroad. FDI will often involve the use of new technologies which can spread from MNC's to local businesses.
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Transfer pricing
Setting of prices for transactions between legally separate businesses which have the same ownership. It can be used to manipulate profit sharing and tax liability
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Subsidiary
Is a company that is completely/partly owned by another company that hold controlling interest in it. Subsidiary companies have their own separate legal identity.
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Pressure Group
Gather together people with a shared interest or concern, in order to influence public opinion, governments and businesses.
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Organisation for economic co-operation and development ( OECD)
34 members. Mainly developed countries with some emerging economies like Mexico. Aims to promote economic and social development around the world.
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Knowledge economy
Various interpretations. Combination of knowledge, skills, innovative tech driving the economic activity and creating competitive advantage. ( Quaternary )
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Underemployment
When people work but do not have enough opportunities to work full time. Or their skills aren't used to full advantage.
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Derived demand
Employers' demand for labour, because they do not want labour for its own sake but for what it might be able to produce. Demand is derived from demand for the final product.
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Voluntary unemployment
Choosing not to work. Can be short run if frictionally unemployed take a break before seeking work. Disaffected workers could be long term voluntary unemployed. Some say cutting benefits will make voluntary unemployed less attractive.
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Countervailing power
Idea that imperfections in markets can produce better outcomes where there is both monopoly power and monopsony power. Reducing the power of one side could make such markets operate less well.
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Absolute Poverty
Severe deprivation which makes it a struggle to survive
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Relative poverty
Not being able to live the lifestyle which is normal for the society.
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Lorenz curve
Visual indicator of inequality of incomes. Households are ranked by income level against cumulative share of total income. more equal distribution of income, the closer to y=x.
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Gini coefficient
Measures inequality using the shape of a lorenz curve. A more even distribution produces a lower coefficient. The coefficient will be a ratio between 0 and 1.
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A dysfunctional society
One without the shared values and code of conduct to function effectively in the pursuit of its objectives.
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Flow
Measurement over a period of time e.g. income
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Stock
Measurement that are quantitative ( count at one specific time ) e.g. wealth
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Tax evasion
Using illegal means and risking punishment to pay less tax
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Tax avoidance
Is legal without always being ethical.
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Tax credits
Paid to working families whose pay is low, ensures they are always better off working than they are unemployed.
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Poverty trap
When a person is worse offf working than on benefits because the impact of lost benefits plus income tax reduces their earned income to less that the benefits. Prevent by tax credits.
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Other cards in this set

Card 2

Front

Benefit from the increase in productivity that occurs when many people move from the agricultural sector into the manufacturing sector

Back

Industrialised economies

Card 3

Front

When MNC's locate in developing countries. the foreign company trains people in the skills they needed to implement the new technologies. In time employees move to other business where they provide training for others.

Back

Preview of the back of card 3

Card 4

Front

Exports and imports form a significant proportion of GDP. there will also be capital movement both in and out of the country and technology transfer.

Back

Preview of the back of card 4

Card 5

Front

Show relative changes so that we can make easy comparisons. (value to be converted/value of base) X 100

Back

Preview of the back of card 5
View more cards

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