Advantages and disadvantages of Globalisation. Need for development.
3rd Problems and Solutions - Globalisation Problem 1. Globalisation and multinationals. First the positive image. Globalisation has two meanings, 1.a good meaning of increasing free trade and capital flows to the 3rd world so they grow and develop and 2. a less pleasant aspect of unfair Globalisation - all the bad aspects in reality where the west imposes high tariffs keeping ldcs out of its rich markets and farm subsidies wrecking 3rd world farmers and the 3rd world. Positive results of globalisation Globalisation is where the world's separate economies become integrated into one as trade grows, capital moves from MDCs to LDCs and labour migrates the opposite way. This comes from the removal of barriers to integration bringing a single world market. The WTO negotiations have brought many trade barriers down, cheaper transport, the internet and telecommunications and the rise of the NICS all are leading to rapid globalisation. We all gain from increased specialization and CA. The 3rd world gains jobs, exports and allocative efficiency as they concentrate on what they are best at producing. Western capital and technology sharply increases their productivity and living standards. Cheap labour "exploitation" leads to an income, and an end to absolute poverty and then higher wages. The open economies that welcomed foreign investment, that focused on exports and created
Current UK economic policies. Government management of the economy is a key political issue and each government sets targets and objectives. These are: stable economic growth, low stable inflation and low unemployment rates.
Government management of the economy is a key political issue and each government sets targets and objectives. These are: stable economic growth, low stable inflation and low unemployment rates. UK government, similarly to all governments around the world, uses different policies to achieve the main objectives listed above. Economic growth can be achieved by using policies in the short and long run. One of the policies that can be used is a monetary policy. In theory, reflationary monetary policy is to reduce interest rates. The lower the interest rates are, the higher economic growth is. What is more, it increases bank lending. People are more likely to borrow money from banks as they feel confident. This is because of the low interest rates and the awareness that they do not have to give back much more than they had lent before. Moreover, reflationary policy lowers value of LSterling because the value of UK currency becomes cheaper in comparison to other currency's. All these factors causes an increase in AD and overall the economic growth. Another short-run policy to increase economic growth to the UK objective level, i.e. 2.25%, is a fiscal policy. A reflationary fiscal policy is used and results in reducing taxes and raising government spending. Reduction in taxes cause that people have more money to consume. As a result they spend more. Government spending increases
Discuss the merits of road pricing (25)
Discuss the merits of road pricing (25) 4 L1. Road Pricing - a direct charge for the use of road space Negative externality - these exists where social costs of an activity is greater than the private cost, congestion is an example of a negative externality L2. For example, The London Congestion Charge - a flat rate indirect tax levied on all vehicles entering a designated charging zone between 7 am & 6 pm, Monday-Friday. It was introduced in Feb 2003 at the rate of £5 per day. It was ? to £8 per day in July 2005. In Feb 2007, the charging zone was doubled in size to cover a substantial zone in London. This is an example of hypothecation (a situation where revenue from tax is directly allocated to some other purpose) as most of the new revenue has been used to improve bus services Another example of road pricing is in Singapore you must buy a car permit for 10 years, which costs up to £75,000. L3. Road Pricing is beneficial to an economy as it is a way of internalising the external costs of congestion and makes the polluter pay. The fact that the 'polluter' now has to pay for the negative externalities exerted by the congestion they cause, means that they will be less likely to use their cars as often, to avoid the charge, or use alternative (more economical) means of transport such as the train or tube, or they may simply think twice about using their car if
Explain the possible causes of inflation
Inflation in an economy is defined as the sustained increase in the general price level, resulting in a decrease in purchasing power of consumers and a fall in the value of money. Some inflation is vital for the macro economy in order to maintain adequate levels of economic growth, and since 1997, the UK government has recognised this fact by allowing The Bank of England Monetary Policy Committee to target a rate of 2.0% over the past fifteen years or so. The measure currently used by EU countries, including Britain, is that of the CPI (Consumer Price Index). This takes a weighted, indexed mean of a basket of goods deemed to be most influential in current household spending across the country. Other measures include the RPI and RPIX (the RPI, excluding mortgage interest repayments, as these fluctuate too readily). The UK has preserved one of the lowest inflation rates among EU countries in recent years, due to a thorough understanding of the causes of inflation and the policies necessary to manage it. On a microeconomic level, inflation can arise from the domestic economy. For example, major energy providers may decide to put up prices in line with projections for the year ahead, or monopolistic supermarket chains could engage in pricing wars, often to the detriment of the consumer and the pocket inflation they experience. Government VAT increases to fund its budget deficit
Using an appropriate diagram explain how a government may attempt to close a deflationary gap.
Using an appropriate diagram explain how a government may attempt to close a deflationary gap. Inflation is a sustained general increase in the level of prices. The level of inflation may be 3% per annum, which means that $100 will buy 3% less goods next year than it does now. The opposite of inflation is deflation. This technically means that the price level, or the average prices of goods and services in an economy, is decreasing. In effect, this means that money is worth more over time. However, the word deflation has gained another meaning, and is more often used to describe a situation where an economy's output growth is slowing. A situation representing deflation can be drawn using the Keynesian 45? Line, which shows combinations of points where the two axes are equal. AD represents aggregate demand, which is the sum total of all demands in the economy at any given price. Real Y represents the real (adjusted for inflation) income of consumers. Keynesian 45? Diagram In this diagram, we can see that the level of aggregate demand is lower than the level of output at full employment, therefore the economy is overproducing and a decline in growth will occur. For example, say the level of current aggregate demand is $500, and aggregate demand at full employment is $600. This means that the value of the deflation is $100, that is, people are spending $100 dollars less than
Examine the factors which affect the international competitiveness of the UK's goods and services (40 marks). International Competitiveness is the ability of a nation to compete successfully
Examine the factors which affect the international competitiveness of the UK's goods and services (40 marks). International Competitiveness is the ability of a nation to compete successfully internationally and sustain improvements in real output and wealth. The factors which affect the interantional competitiveness of the UK's goods and services are Price competitiveness and Non-Price Competitiveness; Price competitiveness such as inflation, exchange rates and unit labour costs and Non price competitiveness such as quality of UK's goods and Income Elasticity of Demand for UK's exports and imports. Inflation is an increase in the general level of prices of a given kind in a given currency. If the inflation rate for UK is high then UK's goods will be expensive, therefore UK will be less price competitive. If the UK goods are expensive as a result of higher inflation, then there will be less demand for UK's exports and increase in demand for Imports, which will result in a balance of payment deficit. So the inflation rate should be controlled in order to be price competitive. Many countries operate inflation target. The UK's inflation target is set for RPIX inflation at 2.5% plus 1% or minus 1%. The Bank of England Monetary Policy Committee sets interest rates with the objective to maintain stable or low level of inflation. However even if the inflation rate for UK is high,
The euro has many effects on businesses and the consumers not only within the Euro zone but also out of it. Firstly I will discuss the advantages of the single currency inside and outside of Europe.
THE SINGLE CURRENCY The euro has many effects on businesses and the consumers not only within the Euro zone but also out of it. Firstly I will discuss the advantages of the single currency inside and outside of Europe. The first advantage is cheaper transaction costs the single currency will allow countries in the euro zone to trade with each other without changing currencies. This will reduce (but not remove) the transaction costs. It will cost less for companies to make payments between countries within the euro zone. Firms in the euro zone will notice the greatest difference. However, businesses from outside the euro zone which trade with companies inside it will also notice the effects. Easier trading would mean that some countries can specialise in one good or service whilst other countries specialise in others. This would mean that there are more goods available to consumers at a lower price, and lower prices means people have more money to spend on other goods, so there will be a higher standard of living. Also, goods would be able to be transported for a cheaper price between participating countries. So by joining the European currency, there would be more trade available and therefore a wider choice of goods and services to choose from. Secondly there will be greater price transparency, the single currency will make price differences in different countries in the
Use the aggregate supply-aggregate demand (AS-AD) model to examine the effects on real GDP and the price level of increases in American tourism to the UK.
Hamit Keswani Keswani .)Distinguish between the short-run and long-run aggregate supply curves, and explain why they are important for the definition of a macroeconomic equilibrium. Use the aggregate supply-aggregate demand (AS-AD) model to examine the effects on real GDP and the price level of increases in American tourism to the UK. The aggregate supply and aggregate demand model helps building up our knowledge of the three factors of macroeconomic performance which are: explain fluctuations in economic activity and how economic agents respond to economic events, provides a basis for understanding movements in the price levels (inflation), and it also helps us understand the process of economic growth. Aggregate supply and aggregate demand are concepts that help us determine the real GDP and the price level (GDP deflator), other things remaining the same. The quantity of real GDP supplied (Y) depends on three important things: The quantity of labour (N), the quantity of capital (K), and the state of technology (T). In order to explain this better we have to study in depth the two aggregate-supply branches: long-run aggregate supply and short-run aggregate supply. The long-run aggregate supply curve is the "relationship between the quantity of real GDP supplied and the price level in the long run when real GDP equals potential GDP"( Parkin, 2000, page 465) . The
What is an international bank? How do international banks compete?
What is an international bank? How do international banks compete? The banking system became internationalised in the 1960s and since then it has been one of the most dramatic trends in the economy. The other two major trends in international and domestic banking are globalisation and securitisation. There are three definitions of an international bank according to Prof. Aliber. A bank may be said to be international if it uses branches or subsidiaries in foreign countries to conduct business. Secondly, a bank may be said to be international if it relates to the currency denomination of the loan or deposit independent of the location of the bank. And the last way of defining international banking is by the nationality of the customer and the bank. The definition for international banking includes location of parent banks and their banking facilities, residency of customers and currency denomination. The existence of international bank service activity is explained by the international trade theory. Banks engage in international banking activities because of the theory of comparative advantage. When a country produces a good or a service at its highest efficiency in that particular country it is said to have comparative advantage. The economic welfare of a country will therefore increases if that country will export its good or service in which it has comparative
Discuss the extent to which a reduction in the rate of interest can be effective in increasing consumer expenditure and investment.
Interest rates are rates charged by the banks and financial institutions on borrowers and savers and depend hugely on the base rate set by the central bank. A cut in interest rates is mainly used in monetarist policies, and in this case a cut in interest rates will belong in a loose monetary policy. Interest rates are normally used to influence levels of aggregate demand. Lower interest rates would mean that saving becomes unattractive as the rate of return on savings is much less, it would mean that mortgage payments will also be lower as it is based on interest rates and also credit is easier to obtain. Consumers will therefore increase their spending on goods and services within the economy as their discretionary income would have increased dramatically. Increases in consumer expenditure will most likely increase aggregate demand as consumer expenditure is a component of aggregate demand. Increases in aggregate demand will promote further rounds of spending in the future as unemployment levels will be lower and economic growth will be higher hence giving consumers more confidence to spend more, therefore interest rates are effective in increasing consumer expenditure. Lower interest rates will also increase investment levels within the economy due to the same reasons mentioned above that will increase consumer expenditure. Lower interest rates would mean to businesses
