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Economics 4.1.5 - Coggle Diagram

- - - - more export revenue
      - trade balance improves
  - - - disputes
- - - - EoS in the long run
        
        costs fall so they can make more supernormal profit, become more price competitive in the future and gain market share
    - - consumer surplus increases
        
        improved economic welfare
        
        less inequality as goods take up a smaller proportion of the total income so GINI coefficient increases
        
        less poverty
  - - - job losses in some domestic industries
- - - - trade creation
      - more trade
      - improves economic welfare
  - - - if these are PED inelastic, this will affect low income households more
    - - affects developing countries only
- - - - decreases unemployment
        
        decreases poverty
- - - - same central bank
  - - - more investor confidence and more investment
        
        inward FDI flows
      - lower transaction costs from not transferring currency
    - - easier to compare prices so consumers can easily choose goods and services
    - - more output and greater productivity
  - - - countries may borrow more than they should knowing other countries will bail them out
        
        IMF and WTO regulation to stop this
    - - countries do not get to control monetary policy
        
        one country might need expansionary fiscal policy and one country might need contractionary fiscal policy depending on economic cycle