2.2 The Global Economy: Unit 40 - 42

Question 1

1. what is the World Trade Organization?

Answer 1

• an international organization that promotes free trade by persuading countries to abolish tariffs and other barriers.
  it policies free trade agreements, settles trade disputes between governments, and organizes trade negotiations.

Question 2

2. What are the 4 activities of WTO?

Answer 2

• trade negotiations.
• implementation and monitoring.
• settling trade disputes.
• building memberships

Question 3

3. What are the 5 criticisms of WTO?

Answer 3

• It is undemocratic (some rights are ignored(environmental, labor) as they focus on corporations)
• It favors the “rights” of corporations over those of workers.
• It is destroying the environment.
• It favors wealthy nations over poorer ones.
• It is causing hardship for poorer nations.

Question 4

4. What are the 5 reasons for an increase in world trade?

Answer 4

• better transport and communication.
• relaxing of trade barriers.
• Development of multinationals.
• Travel and consumer awareness.
• Trade agreements.

Question 5

5. What are the 3 changes in trade in developed countries?

Answer 5

• loss of trade in manufacturing
• more air travel.
• Widening of the development gap.

Question 6

6. What are the 5 changes in trade in developing countries?

Answer 6

• an increase in net migration
• increased FDI in Africa.
• Rise in commodity dependence.
• Debt cancellation.
• Reduction in barriers.

Question 7

7. What is the exchange rate?

Answer 7

• price of one currency in terms of another.

Question 8

8. What are the 3 factors affecting the demand for a currency?

Answer 8

• interest rates.
• currency speculators.
• the demand for exports.

Question 9

9. What are the 3 factors affecting the supply of currency?

Answer 9

• interest rates in other countries
• currency speculators
• the demand for imports.

Question 10

10. What is the foreign exchange market?

Answer 10

• market where foreign currencies can be bought and sold.

Question 11

11. What is the meaning appreciate?

Answer 11

where the value of a currency rises owing to market forces- the exchange rate increases as a result.

Question 12

12. What is revalued?

Answer 12

• when a government fixes a new higher exchange rate.

Question 13

13. What is depreciate?

Answer 13

• where the value of a currency falls owing to market forces - the exchange rate falls as a result.

Question 14

14. what is devalued?

Answer 14

• when a government fixes a new lower exchange rate.

Question 15

15. What is the impact on imports and exports after the appreciation?

Answer 15

imports :- demand will rise as goods become cheaper.
exports:- demand will fall as goods of the native country have become expensive.

Question 16

16. what is impact on current account after appreciation?

Answer 16

• it is likely to be negative. as there will be less exports as demand falls and there will be more imports as demand rises.

Question 17

17. What is the impact on imports and exports after the depreciation?

Answer 17

imports :- demand will fall as goods become expensive
exports:- demand will rise as goods of the native country have become cheaper

Question 18

16. what is the impact on the current account after depreciation?

Answer 18

• it is likely to be postive. as there will be more exports as demand rises and there will be less imports as demand falls

Question 19

18. what could the government do if there is a persistent current deficit?

Answer 19

• is to let the currency depreciate as demand for imports will fall and demand for exports will rise.