Economics Unit 3
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| What is International Trade? | show 🗑
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| show | Efficient use of world resources - goods will be produced where it is most efficient to produce them. Reduced unit costs, greater output + better quality.
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| What are the gains of International Trade? (2) | show 🗑
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| What acronym is used to remember the gains from trade? | show 🗑
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| show | There are no restrictions.
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| show | Protect employment. Protect strategic industries - (food, energy, defence supplies). To improve a weak balance of payments. Retaliation. Prevent dumping. Help the environment. Protecting consumers. Exerting political pressure.
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| show | The selling of goods, (by foreign producers) below the cost of production.
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| show | Tariffs. Quota. Embargoes. Subsidies. Soft loans. Favouring. Standards.
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| What is a Tariff? | show 🗑
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| show | Restrictions on the quantity of an import allowed in the country.
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| What is an Embargoes? | show 🗑
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| What is a Subsidy? | show 🗑
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| What are Standards? | show 🗑
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| show | Retaliatory action - against country's exports. Reduces competition - allows inefficiency among domestic producers - rising costs + prices. Reduced choice for consumers. Reduced trade - unemployment (industries dependant on exporting). Political ill will
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| What is a single market? | show 🗑
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| show | A group of around 120 countries - to negotiate reductions + removal of trade barriers between member countries.
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| show | Canada, Mexico, US
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| What does SAARC stand for? | show 🗑
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| show | A statement of the flows of money between the UK and the rest of the world in 1 year.
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| What is the Current Account? | show 🗑
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| What are the 4 various parts of the Current Account? | show 🗑
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| show | Travel and Financial services, Government Services, Sea transport, civil aviation.
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| What does Travel services include? | show 🗑
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| What does Sea Transport and Civil aviation include? | show 🗑
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| What are Financial Services? | show 🗑
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| show | Earnings + Payments for (embassies overseas and troops overseas)
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| show | Its price in terms of other currencies.
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| show | Risen in value.
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| show | UK exporters (raise price + keep revenue same) or (keep price the same + receive less revenue)
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| show | UK importers (after converted into (£) it is cheaper)
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| What effect might a stronger (£) have on the Current Account? | show 🗑
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| show | It will deteriorate. (deficit = less exports, more imports.)
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| show | By supply + demand.
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| show | They are determined on the foreign exchange market (the FOREX) by demand and supply forces.
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| show | Speculation = you think a currency will rise in value (buy it). Or fall in value (sell it). Returns (interest rates) = buy currency if interest rates rise, sell it if interest rates fall.
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| show | Buying imported goods and services. Foreigners buying exports of goods and services.
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| Why you would buy a foreign currency? (Long-term motives) | show 🗑
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| Why do we need foreign currencies? | show 🗑
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| What is the Foreign Exchange Market? | show 🗑
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| Who demands (£) in the foreign exchange market? | show 🗑
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| show | Government, Firms, Individuals. (British)
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| show | A weighted index of the value of the (£) against a basket of goods of other currencies.
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| show | Imports become more expensive, Exports become cheaper.
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| show | Imports become cheaper, Exports become more expensive.
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| show | To reduce production costs, travel costs. To penetrate new markets. To take advantage of host-government financial assistance. To escape government regulations at home. To earn higher profit after taxes.
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| How does "overseas expansion" reduce production costs? | show 🗑
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| How does "overseas expansion" reduce transport costs? | show 🗑
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| show | Presence of US, Japan firms in Europe - evade tariffs imposed by the EU.
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| show | Many governments are keen to attract foreign firms - various incentives are offered (low-cost premises, grants, low-interest loans, training subsidies.)
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| How does "overseas expansion" escape government regulations at home? | show 🗑
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| How does "overseas expansion" help earn higher profits after tax? | show 🗑
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| show | If investment by a multinational allows 'host' country to produce more cheaply than other countries - imports will be cut, exports boosted.
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| show | It is created by the multinational firm, and firms asked to supply services and components.
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| What are the benefits to technology and management of multinational companies to the 'host' country? | show 🗑
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| show | The large scale of operation enables the firm to be efficient. (Higher wages)
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| show | Trade (imports increase if it imports components). Employment (low skilled). Profits are transferred out to home country. Tax avoidance (robs government of funds to finance public services).
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| show | E.g. Europe - a group of countries trading without any restrictions / barriers.
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| show | No trade barriers - more trade. Bigger firms - leads to economies of scale (buying in bulk - efficient). Increased competition - better price, choice, quality. Mobility of resources - more efficient / productive. Rules - improve equality of society.
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| show | Tariffs put on outside countries - decrease demand. Economic activity is centred on the geographical centre of EU - effects like income+opportunity for countries further away. Disagreements on fiscal taxes. Movement of labour - low wages in poor counties
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| show | Single currency - promotes trade, reduces costs. No fluctuation in exchange rate - lowers risks firms take. Low inflation environment - forced to be competitive (can't alter exchange rate). Price transparency - better decisions. ECB - set interest rates.
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| show | European Central Bank - it is independent and can alter interest rates according to its inflation target.
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| What are some main points Against the UK joining the euro? | show 🗑
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| show | Increased efficiency - resources are diverted to areas where there is low opportunity cost of production.
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| show | As the size of the European market increases - there will be new demand for goods and services (especially ones that the UK specialise in).
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| show | Foreign investment by British firms into Europe's new states - improves from of (IPD) interest, profits and dividends. (Boosts national income, supports current account)
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| show | Greater opportunities to import low-cost skilled labour (in areas of labour shortages). Also helps with the ageing population.
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| show | Extra costs for financing EU programmes (new members tend to be poor). Social and economic pressures - poorer migrants depresses wages in certain industries. Shift of foreign direct investment and jobs to Europe (driven by tax competition + lower wages).
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| What are some characteristics of Developing Economies (looking at the quality + quantity of resources available) | show 🗑
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| Why do Developing countries remain poor? (Internal Factors) | show 🗑
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| Why do Developing countries remain poor? (External Factors) | show 🗑
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| show | People who are currently employed on the land will be replaced by machines.
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| What is the problem with encouraging savings to increase investment? (INTERNAL) | show 🗑
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| What is the problem with investing in infrastructure to encourage geographical mobility? (INTERNAL) | show 🗑
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| show | Only lasts for a short period of time - doesn't solve the source of the problem.
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| What is the problem with giving grants? (money given with no expectation of repayment) (EXTERNAL) | show 🗑
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| show | Who checks that this is done - open to abuse.
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| show | High growth rates, export sales, levels of education + training, Manufacturing industry dominates, capital intensive production, reliance on international trade.
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| What does "BRIC" and "MINT" stand for? (2 groups of emerging economies) | show 🗑
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