16- international trade and free trade

Question 1

effects of a rising exchange rate;

Answer 1

£ will buy more foreign currency

UK imports will be cheaper, however exports will be more expensive

Question 2

affects of a fall in the exchange rate;

Answer 2

£ will buy less foreign currency
exports- cheaper
imports- expensive

Question 3

The Bank of England…

Answer 3

• able to sell and buy currency to prevent damaging changes to the exchange rate
• external body

Question 4

What is a trade block?

Answer 4

A group of countries within a region that protect themselves from imports from non-members e.g. The EU

Question 5

What is international trade?

Answer 5

The exchange of capital, goods and services across the border of different countries

Question 6

What are the benefits of international trade?

Answer 6

Variety of products
economic efficiency 
growth 
international cooperation 
specialisation

Question 7

Disadvantages of free trade

Answer 7

May require membership
Foreign countries may benefit more from the actual country
Could be easier for domestic companies to be taken over

Question 8

What determines the demand for a pound?

Answer 8

Foreign investments
Hot money= highest interest rate possible
Desire for foreign customers to buy exports

Question 9

What is exchange rate?

Answer 9

The value of one currency compared to another, determined on demand of supply