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Economics Theme 4 - Coggle Diagram
Economics Theme 4
Protectionism
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Tariffs - Taxes imposed on goods and services imported into a country which reduces the quantity imported
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Export Subsidies - A grant given by the government to encourage domestic production by lowering their cost of production by lowering their cost and increasing international competitiveness
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Voluntary Export Restraint Arrangements - Where two countries make an agreement to limit the volume of exports to one another over a period of time
Import Licensing - A license or permit to import specific goods. Restricts import to only those permitted
Foreign Exchange Control - Limiting the amount of foreign currency that can move between countries by limiting how much foreign currency domestic firms can access.
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Impacts
Retaliation
Causes tax revenue to fall.
Trade wars may reduce FDI and cause capital flight
Exporting firms have lower demand
International Trade
Key Terms
Opportunity cost = sacrifice/gain
Terms of trade = (average price of exports/average price of imports) x 100
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Absolute Advantage- Where one country can produce goods more efficiently than others because of factor endowment and/or the right climate
Comparative Advantage - Where one country can produce goods at a lower opportunity cost than another. Less resource sacrifices in production.
Comparative advantage assumes that cost are constant and that only two economies are producing goods
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Dynamic Efficiency
Trade tends to speed up the pace of technological progress and innovation across different industries
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Patterns of Trade
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Emerging economies generally have lower production costs so they export more. They also have a large amount of people moving out of absolute poverty so demand for luxury goods rise
Trade Blocs
Organisations which consist of a group of countries who choose to trade with limited or no trade barriers
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Customs Union
E.g. ASEAN ( Association of Southeast Asian Nations)
Same as above but with common external tariffs to non-member countries
Single Market or Common Market
E.g. The E.U
As above but with free movement of labour and capital. Similar labour, healthcare and agriculture legislation
Monetary Union
E.g. EuroZone or E.M.U (Economic Monetary Union)
As above but with a single currency, central bank and similar monetary and fiscal policy
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