econninja case studies

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

Taiwan's Comparative Advantage

Taiwan has a comparative advantage in semiconductor production, producing faster and cheaper processors.

Benefits of Comparative Advantage

Increased worldwide IT efficiency due to Taiwan's specialization in semiconductor production.

Limitations of Comparative Advantage

Taiwan's specialization creates leverage that may be deemed unfair by other countries.

France's Comparative Advantage

France excels in producing wine and cheese due to favorable climate and expertise.

Benefit of France's Comparative Advantage

Higher production efficiency of wine and cheese, allowing less focus on less efficient products.

Limitation of France's Comparative Advantage

Ignoring transportation costs may make production elsewhere more economical.

Australia's Comparative Advantage

Australia has a comparative advantage in beef production due to vast land.

Benefit of Australia's Comparative Advantage

Countries like China can focus on rice production without sacrificing beef.

Limitation of Australia's Comparative Advantage

High transportation costs limit beef exports due to Australia's distance from other markets.

Tariffs

Taxes imposed on imported goods to protect domestic industries.

US Steel Tariffs 2018

The US imposed tariffs on imported steel to protect its domestic steel industry.

Benefits of US Steel Tariffs

Protected domestic steel jobs and generated government revenue.

Cost of US Steel Tariffs

Increased prices for consumers and reduced revenue for foreign exporters.

Quotas

Limits on the quantity of imported goods to protect domestic industries.

US Car Import Quota 1980s

The US imposed quotas on Japanese car imports to protect domestic car manufacturers.

Benefit of US Car Quota

Increased investment in American car firms and job creation.

Cost of US Car Quota

Increased car prices for US consumers and more competition for domestic firms.

Subsidy

Financial assistance from the government to support a specific industry.

EU Common Agricultural Policy

A system providing subsidies to farmers to promote agricultural production.

Benefit of EU Agricultural Subsidies

Help keep food prices low and encourage domestic food production.

Cost of EU Agricultural Subsidies

Retaliation from other countries and significant costs to the EU.

Administrative Barriers

Regulations that make it more difficult for foreign goods to enter a country.

China's Import Ban on Waste

China banned imports of waste materials to improve environmental standards.

Benefit of China's Import Ban

Reduction of waste in China, contributing to environmental improvement.

Cost of China's Import Ban

Western countries had to find alternative waste disposal methods.

Free Trade Area

A region where tariffs and quotas between member countries are eliminated.

NAFTA

The North American Free Trade Agreement, a free trade area including Canada, US, and Mexico.

Benefit of NAFTA

Increased trade flows and lower production costs in Mexico.

Cost of NAFTA

Potential job loss in American industries due to competition from Mexican imports.

Customs Union

A group of countries that have a common external tariff on imports.

South African Customs Union (SACU)

A customs union comprising South African countries: Botswana, Eswatini, Lesotho, Namibia, South Africa.

Benefit of SACU

Increased trade flow and reduced competition from outside the union.

Cost of SACU

Difficulty in establishing new policies due to differing national interests.

Common Market

A group of countries that allows free movement of goods, services, capital, and labor.

European Economic Area (EEA)

A market including EU countries and non-EU members like Norway and Iceland.

Benefit of EEA

Standardized regulations improve consumer confidence and market stability.

Cost of EEA

Loss of autonomy over individual national markets.

Monetary Union

A group of countries using a common currency.

Eurozone

Group of nations that use the Euro (€) as their currency.

Benefit of Eurozone

Increased trade efficiency among member countries.

Cost of Eurozone

Centralized monetary policy may not suit individual member needs.

Currency Appreciation

An increase in the value of one currency relative to another.

Japan's Currency Appreciation

Rapid appreciation of the Yen in the late 1980s to early 1990s.

Benefit of Yen Appreciation

Improved living standards for Japanese citizens due to lower import costs.

Cost of Yen Appreciation

Exports decreased, leading to slower GDP growth and recessions.

Currency Depreciation

A decrease in the value of one currency relative to another.

Argentina's Currency Depreciation

Rapid depreciation of the Argentine peso in the late 1990s.

Benefit of Depreciation

In theory, should increase exports.

Cost of Depreciation

Severe imported inflation and difficulties in repaying foreign loans.

Currency Devaluation

Deliberate decrease in the value of a country's currency.

US Plaza Accord 1985

An agreement aimed at devaluing the US dollar against other currencies.

Benefit of Plaza Accord

Helped improve US trade balance with western countries.

Cost of Plaza Accord

Failed to reduce the US trade deficit with Japan.

Fixed Exchange Rate

A currency value maintained at a set level against another currency.

Thailand's Fixed Exchange Rate

Imposed fixed exchange rate with the dollar before 1997.

Benefit of Fixed Rate

Increased economic stability and investment.

Cost of Fixed Rate

Susceptibility to speculative attacks, leading to economic crisis.

Managed Exchange Rate

A system where a country’s central bank intervenes to stabilize its currency.

Denmark's Managed Exchange Rate

Denmark maintains a stable currency value against the Euro.

Benefit of Managed Rate

Stabilizes exchange rates, avoiding severe fluctuations.

Cost of Managed Rate

Loss of significant currency autonomy.

Balance of Payments

A statement that summarizes all financial transactions made between entities in one country and the rest of the world.

China's Trade Surplus

China regularly exports more than it imports, leading to a trade surplus.

Component of Current Account

Trade balance, income, and current transfers.

Persistent Current Account Deficit

Occurs when a country imports more than it exports over a long period.

Financial Account Surplus

A financial account with higher inflows than outflows, offsetting current account deficits.

Marshall-Lerner Condition

Condition for trade balance improvement to occur with currency depreciation.

J-curve Effect

Initial worsening of the trade balance following a currency depreciation before improvement occurs.

Poverty Trap

A situation where individuals or communities cannot escape poverty due to self-reinforcing mechanisms.

Cycle of Poverty

Low income leads to low savings and investment, perpetuating poverty.

Economic Barriers

Factors that hinder individuals or nations from achieving economic growth.

Political Barriers

Government or institutional obstacles that impede economic development.

Social Barriers

Societal factors that limit participation in economic activities.

Significance of Barriers to Development

Different barriers can significantly impact economic growth and development depending on the country's context.

Sustainable Development

Economic development that is conducted without depletion of natural resources.

Measurement of Economic Development

Involves various dimensions: income, health, education, sustainability, and governance.

Economic Growth versus Development

Economic growth is an increase in GDP, while development includes improvements in living standards, health, and education.

Government Intervention

The act of government involvement in the economy to promote development.

Market-Oriented Approach

Strategy emphasizing the role of free markets in promoting economic growth.

Export-Led Growth

A strategy aiming to grow the economy by maximizing exports.

Infrastructure Investment

Spending by the government or private sector to improve economic facilities.

Education Investments

Funding directed toward improving educational systems to enhance human capital.

Technology Innovation

The development and application of new technologies to improve productivity.

Trade Liberalization

The removal or reduction of trade barriers to encourage trade.

EU Common Agricultural Policy

Subsidies and policies aimed to support farmers and stabilize agricultural markets.

Economic Integration

The unification of economic policies and practices among countries.

Globalization

The increasing interconnectedness of economies and cultures worldwide.