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POLD89H3 (66)
Lecture 4

Week 4- Old Governance vs. New Governance- The State and Global Governance Institutions and Global Economy.docx

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Political Science
Waldemar Skrobacki

Week 4: Old Governance vs. New Governance: The State and Global Governance Institutions and Global Economy Chapter 6 International Trade and Business The GDP Equation C + I + G + (X - M) = GDP - C: consumer spending, amount of spending on durables (long-lasting, expensive goods, like houses and cars), and the level of consumer confidence (indication of how financially secure and optimistic consumers are feeling, based on which they are willing to spend) - I: investment, business confidence is viewed by economists as a valuable indicator of the health of the economy - G: government spending, governments spend on physical infrastructure, military, education and healthcare systems, social programs, and wages for their own workforce of civil servants - X: exports, goods produced for sale to another country. Exports increase economic growth because when foreign customer buys your good, his or her money comes into your pocket, adding to national economy - M: imports, goods produced in another country and purchased in your country. Imports decrease economic growth, has a negative relationship with GDP - Expansion Phase: growing phase - Contraction Phase: when GDP phase, a period of recession or shrinking economic growth Interest Rates - represent price of money, what banks, other lenders, charge when they lend you money - Central Bank: public institution that is in charge of printing the national currency and managing interest rates - Overnight Rate: leading national interest rate - Semi-Autonomous: arm’s length from the national government, so passions of party policies font interfere with the serious, sober, difficult, technical business of setting interest rates - Monetary Policy: control of money supply by a semi-autonomous central bank, detached from party politics - Fiscal Policy: national government’s policies, how governments spend money, reflected in official budget, rate of taxation, new spending measures, etc. The direct daily control of the government - Hyperinflation: very rapid unpredictable price increases, bad for economy, prevents consumers from planning purchases and constant rise of prices means they afford less - Deflation: downward spiral of falling prices and falling asset values, encourages saving instead of spending, causes economy to shrink Currency - most traded currencies: US dollar, EU’s dollar, China Yuan, Japan Yen - Reserve Currency: a currency that central banks of other countries are c comfortable holding as part of their foreign exchange reserves International Trade - the movement of goods and services across national borders in exchange for money - Trade Surplus: country exports more than it imports - Trade Deficit: country imports more than it exports Autarchy/ Mercantilism - Autarchy is a policy of determined self-sufficiency in economic matters, the drive for a nation to provides as much as it can for itself, and minimize any dependency on foreign relations or trade - Mercantilism: sees national government playing the leading role in economic policy, trying to do the absolute best it an for its country and its people by maximizing their resources and using them to further develop and strengthen the nation Free Trade/ Internationalism - Internationalism: being a fully interconnected participant of the global economy - Free Trade: the exchange of goods and services between countries that elect not to use any protectionist measures against each other, its international commerce that is tariff-free, quota-free, ban-free, and subsidy free - BRIC Countries: Brazil, Russia, India, and China, who meet to draw world attention to their emerging status as a major economic and political powers, and advance their claims for a multi polar world order to replace the two dimensional view that considers the developed West - Protectionist: use of government power in a manner inconsistent with free trade, hurdles or obstacles placed by the government on imports in order to protect certain domestic goods or industries (ex. Tariff) - Tariff: tax on foreign, imported goods, which increases the price of these goods, making them more unattractive to consumers - Quotas: limits a country places on the number of foreign produced goods that its willing to allow to be imported for sale into its country - Government Subs
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