Economics Unit 3
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
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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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| show | Increased competition for producer - increased efficiency. Increased choice. Lower prices. Closer political links.
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| show | Specialisation occurs. Monopolies are crushed nationally (competition). Increased choice for consumers. Links between countries. Economies of scale created through bigger market sizes. (SMILE)
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| What does free movement mean? | show 🗑
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| Why are there trade restrictions? | show 🗑
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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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| What is a Quota? | show 🗑
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| show | A complete ban on certain goods, imports from certain sources, exports to certain destinations.
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| show | A sum of money from the Government to domestic producers which allow them to compete more strongly in their home, and foreign markets.
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| What are Standards? | show 🗑
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| What are the effects of restrictions? | show 🗑
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| What is a single market? | show 🗑
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| What is the World Trade Organisation? (WTO) | show 🗑
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| show | Canada, Mexico, US
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| show | South Asian Association Regional Cooperation.
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| What is a Balance of Payments Account? | show 🗑
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| show | A statement which records transactions in goods and services. Earnings = (+) Payments = (-)
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| What are the 4 various parts of the Current Account? | show 🗑
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| What services does the Current Account include? | show 🗑
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| show | Covers, earnings from foreign tourists (export), spending by Uk tourists abroad (imports)
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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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| What does appreciated mean? | show 🗑
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| A strong (£) is troubling for who? | show 🗑
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| A strong (£) is beneficial for who? | show 🗑
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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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| How are exchange rates determined? | show 🗑
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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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| Why you would buy a foreign currency? (Medium-term motives) | show 🗑
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| show | Investing in other countries - (Foreign Direct Investment / FDI). Foreign Multinational firms investing in the UK (FDI)
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| show | Trade abroad, buy foreign goods.
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| What is the Foreign Exchange Market? | show 🗑
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| show | Governments, Firms, Individuals. (Foreign)
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| show | Government, Firms, Individuals. (British)
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| What is the sterling exchange rate index? | show 🗑
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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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| How does "overseas expansion" penetrate new markets? | show 🗑
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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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| show | To escape restrictions - minimum wage, minimum working conditions.
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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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| What are the benefits to employment of multinational companies to the 'host' country? | show 🗑
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| show | New ones are brought in - copied by other firms - lead to improves efficiency.
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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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| What are the disadvantages of a single market? | show 🗑
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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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| What is the ECB? | show 🗑
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| show | Instability - weak members (Greece) and strong members. Can't devalue your currency to increase competition. ECB decides interest rates - may not fir all countries. Transition costs - adjust price lists, adapt machines to take euro (one-off cost).
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| show | Increased efficiency - resources are diverted to areas where there is low opportunity cost of production.
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| How does EU enlargement effect the UK? (market) | show 🗑
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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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| show | Uncertain Revenue. Lack of access to certain markets. Multinationals can bring (too much political power, environmental damage, export profits, avoid tax.)
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| show | People who are currently employed on the land will be replaced by machines.
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| show | Aimed at only the few rich people - most of the population don't have enough to live on.
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| show | where does the money for investment come from?
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| What is the problem with giving gifts (medicine, food etc)? (EXTERNAL) | show 🗑
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| What is the problem with giving grants? (money given with no expectation of repayment) (EXTERNAL) | show 🗑
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| What is the problem with writing off debts? (EXTERNAL) | show 🗑
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| What are the characteristics of Emerging Economies? | show 🗑
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| What does "BRIC" and "MINT" stand for? (2 groups of emerging economies) | show 🗑
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