Globalisation involves the increased integration and interdependence of the global economy. Since the 1960s, there has been an increased rate of globalisation, which has been characterised by rising trade, rising exports as % of GDP, greater movement of labour and capital, and an increased interdependence of the global economy. Globalisation has benefitted some countries more …
Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries The theory of comparative advantage states that if countries specialise in producing goods where they have a lower opportunity cost – then there …
The Fisher effect examines the link between the inflation rate, nominal interest rates and real interest rates. It starts with the awareness real interest rate = nominal interest rate – expected inflation. If you put money in a bank and receive a nominal interest rate of 6%, but expected inflation is 4%, then the real …
An indirect tax is charged on producers of goods and services and is paid by the consumer indirectly. Examples of indirect taxes include VAT, excise duties (cigarette, alcohol tax) and import levies. Example of VAT as an indirect tax VAT rates may be set at 20%. This percentage tax is known as an ad Valorem …
Evaluation is the ability to look at issues from a critical perspective; to look at other potential outcomes. Evaluation questions will typically begin with words like, discuss, evaluate, to what extent, assess. These are some ways to get evaluation marks for microeconomics. (note there are potentially more ways to evaluate but this gives a few …
Readers question: What is the difference between tax and inflation? Tax is a way for the government to raise revenue. It includes charges placed by the government on goods/income. For example, VAT is a tax which means consumers have to pay an additional 20% of the price in the form of tax which goes to …
The resource curse is the observation that countries endowed with a rich source of natural resources can struggle to make effective use of these and often end up with low levels of economic development than countries with low levels of natural resources. There are various reasons put forward to explain this resource curse, such as …
The infant industry argument states that developing countries are justified to put tariffs on imports if they are seeking to develop new industries and diversify their economy. In particular, there is a justification for placing tariffs on industries where a country has a latent comparative advantage. This means that if they can develop infrastructure and economies …