4.1 International economics

Question 1

Globalisation

Answer 1

The ever increasing integration of the worlds local, regional and national economies into a single international markets

Question 2

Characteristics of globalisation

Answer 2

Free trade across national boundaries of goods and services so that trade between countries becomes as straightforward as trade within a country
Free movement of labour (EU)
Free movement of capital (Microsoft can buy smaller local UK gaming company)
Free interchange of tech and intellectual capital

Question 3

Globalisation cont

Answer 3

This world of perfect free movement and no barriers of trade doesn’t exist.
In reality, there is huge variety but most of the world exists on a spectrum between two extremes
COVID19 and Donald trump slowed globalisation

Question 4

Causes of globalisation

Answer 4

Growth of trading blocs
Political shift towards open free market forces e.g end of Cold War
Decrease in transport/ communication costs
Reduction of barriers in world trade e.g WTO
Increased importance of transnational companies - these companies establish operations in other countries and when they do this to lessen operational costs which is known as offshoring
Incentive provided by international financial flows - FDI has been seen as key reason for massive growth in China and Malaysia, encouraging other countries to adopt less protectionist policies

Question 5

Impact on consumers (adv)

Answer 5

More consumer choice
There is a variety of diff products available on high streets that have been shipped from globally.
Fall in prices as production has shifted to lost cost locations abroad
Raised incomes

Question 6

Impact on consumers (disadv)

Answer 6

Goods have become more homogenised losing individual features
Raising global income in LR can lead to higher prices as there is higher demand
Some goods display worrying tendencies to vary significantly overtime in price e.g oil price increase will be felt more widely

Question 7

Impact on workers (adv)

Answer 7

Structural unemployment can be a good thing as it can cause a longer term shift toward a relevantly trained labour force
Immigrants can fill labour gaps and bring enterprise creating new industries which creates new jobs
Demand for high skilled labour increases, wages
Lowering inequality gap in developing countries as they can demand similar wages
Multinational companies operating abroad create jobs in their countries of operation

Question 8

Impact on workers (disadv)

Answer 8

Job losses
Immigration increases competition for jobs which causes lower wage rates
COVID19 has sped up shift in multimedia companies to increasingly hire foreign national who can work remote so workers are competing with global citizenry
Low skilled labour in developed countries have seen real wage drops as firms try to drive costs down
Increased inequality in developed countries as there is upward wage pressure on high skilled and downward pressure on low skilled
Multi nationals have been criticised for hiring labour abroad rather than domestically

Question 9

Impact on producer (adv)

Answer 9

Companies can take advantage of specialism abroad e.g better shipping quality
Reduce risk as a greater number of supply chains can mean companies losses are mitigated if one international customer closes down
Costs reduce as suppliers can be chosen from wider area + companies can employ from abroad where wages are lower
Shift of production to power countries is raising living standards in developing world as there is influx of new jobs

Question 10

Impact on producer (disadv)

Answer 10

Companies can become dependent on long supply chains if they collapse = business failure
Tax avoidance as tics use transfer pricing (shifting pricing to countries where the most tax will be saved), tax haven offices or just generally shift production to a low tax country

Question 11

Impact on gov (adv)

Answer 11

Adapting to challenges with new and innovative policies inc increasing spending on eduction and R&D to give national workers an edge in a globalised market place

Question 12

Impact on gov (disadv)

Answer 12

Shifts of production to developing countries leads to lower tax revenue, domestic jobs and potentially exports
Pressure from tax avoidance has led to some countries lowering tax rates which negatively impacts gov revenue
Rising corruption in developing world as large TNCS have overly influenced gov policy

Question 13

Environmental impact (adv)

Answer 13

Large TNCS have better environmental records that smaller national companies as their actions are moron gov spotlights and they have financial resources and tech to minimise environmental destruction

Question 14

Environmental disadvantages

Answer 14

Positive correlation between globalisation and increased environmental damage - as large portions of forest and farmland have been stripped for resources as global demand soars

Question 15

Individual nations advantages

Answer 15

Rising incomes, more and better quality jobs, and more consumer choice

Question 16

Individual nations disadvantage

Answer 16

Loss of industries = unemployment and lower ages
Urbanisation in poorer countries to keep pace with globalisation can have negative consequences

Question 17

Non economic advantages

Answer 17

Increased multiculturalism/ cultural understanding and diversity
Decline in national sovereignty makes war less appealing

Question 18

Non economic disadvantages

Answer 18

Weakens native cultures
Growth in trading blocs has led to some sacrifices regarding national sovereignty

Question 19

Specialisation

Answer 19

When a country focuses on producing one or a narrow range of goods and services (mostly for export services)

Question 20

Absolute advantage

Answer 20

An economy can produce a good for lower costs than another. It means that less resources are needed to produce the same amount of goods/ the same resources can produce a greater quantity of goods

Question 21

Comparative advantage

Answer 21

Occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries

Question 22

Calculating opportunity cost

Answer 22

Opportunity cost of producing good A = Total units produced of good B / Total units produced of good A

Question 23

Limitations of comparative advantage

Answer 23

Assumes there are no transport costs and these can lower/prevent CA
Assumes cots are constant and there are no EOS (which help to increase gains from specialisation
Goods are assumed to be homogenous which is unrealistic therefore countries product cannot be perfectly compared
Assumes FOPs are perfectly mobile, there are no trade barriers and there is perfect knowledge
Whether trade takes place will depend on the terms of trade between countries

Question 24

Adv of specialisation and trade

Answer 24

Comparative advantage shows how world output can be increased if countries
specialise in what they are best at producing, this will increase global economic
growth.
Specialisation allows countries to benefit from economies of scale , which reduces
costs and therefore decrease prices globally.
Different countries have different factors of production and so trade allows countries to make use of factors of production, or the things produced by these factors, which they otherwise may have been unable to.
Trade enables consumers to have greater choice about the types of goods they buy,
and so there is greater consumer welfare.
Free trade between countries increases competition for firms, therefore there is
much greater focus on innovation.

Question 25

Disadv of specialisation and trade

Answer 25

Trade can lead to over-dependence, where some countries become dependent on particular exports and imports. It can cause structural unemployment, as jobs are lost to foreign firms who are more efficient and competitive. The less mobile the workforce, the higher the chance that changes in demand due to trade will reduce output and employment over long periods of time. The environment will suffer due to the problems of transport as well as the increased demand for resources e.g. deforestation. Countries may suffer from a loss of sovereignty due to signing international treaties and joining trading blocs, for example in the EU.

Question 26

Patterns of trade

Answer 26

Refers to the changing nature of trade between economics e.g UK-EU trade

Question 27

Influences on POT

Answer 27

CA changing More exporting of manufactured goods Growing supply chains Emerging economies Trading blocs growing Exchange rates changing

Question 28

CA on patterns of trade

Answer 28

Countries tend to export g+s in which they have a CA and import those in which they have a comparative disadvantage This principle is a fundamental driver of international trade patterns

Question 29

Emerging economies on patterns of trade

Answer 29

Emerging economies often become major exporters of manufactured goods and services altering dynamics of global trade. They can both compete with and complement established economies

Question 30

Trading blocs

Answer 30

These agreements can significantly impact trade flows. Within trading blocs, member countries often enjoy reduced tariffs and trade barriers, leading to increased trade among them. Bilateral agreements can create preferential trading relationships between specific countries, boost trade in specific sectors

Question 31

Exchange rates

Answer 31

Changes in the ER can have a direct impact on trade. A depreciation of a country's currency can make its exports cheaper and more competitive on the international market, leading to increased exports. Conversely, a stronger currency can reduce exports and increase imports

Question 32

Terms of trade

Answer 32

The terms of trade of a country measures the price of a country's exports relative to the price of its imports or the ratio between average export prices and average import prices This concept is very important for developing nations who rely heavily on selling exports to purchase manufactured imports that cannot be produced in the country

Question 33

Exports

Answer 33

An inflow of money into the economy

Question 34

Imports

Answer 34

An outflow of money from the economy

Question 35

TOT formula

Answer 35

Index of average export prices / index of average import prices x 100 It is measured in the form of an index because it is calculated from the weighted average of thousands of different export goods and import goods prices

Question 36

Value of TOT increases

Answer 36

This means a country can purchase more imports with its level of exports. This could be because export prices increased or import prices decreased.

Question 37

Deterioration in TOT

Answer 37

We can now buy less imports with our current level of imports. This could be because import prices increased and export prices decreased

Question 38

Factors affecting TOT

Answer 38

Change in ER a rise in ER = fall in price of imported goods = improvement in TOT Inflation Rise in inflation relative to other countries will improve the TOT as its x become more attractive to consumers Productivity levels Rise in productivity = lower COP = drop in price of x = deterioration in the TOT Increasing demand Rising demand for exports will increase the price of exports improving TOT Rise in demand for imports = price increase of imports = deterioration Increasing incomes Led to increased demand for certain sectors e.g tourism = increased prices for holiday = improvement in TOT for countries with large tourism sectors

Question 39

Improving TOT

Answer 39

leads to higher living standards Country can import more for a given quantity of exports Cost push inflation can also be brought under control

Question 40

Improving TOT pt2

Answer 40

Leas to deteociatio in the current account of the balance of payments - declines competitiveness of countries goods and services can cause problems

Question 41

Exports price elastic TOT

Answer 41

this leads to an improvement in the TOT but a decline in the current account balance as the value of a country's exports declines

Question 42

Export price inelastic TOT

Answer 42

The rise in export prices also leads to an improvement in the TOT, but as export volumes remain steadier – the current account position will still improve. A fall in export prices will cause the reverse.

Question 43

Imports price elastic TOT

Answer 43

Rising import prices will deteriorate the terms of trade, but as the demand for that import falls away, the current account balance will improve. A fall in import prices will cause the reverse.

Question 44

Imports price inelastic TOT

Answer 44

Rising import prices will deteriorate the terms of trade, but as the demand for that import remains resistant and high, the current account balance will suffer. A fall in import prices will cause the reverse.

Question 45

Trading bloc

Answer 45

A group of countries that have signed an agreement to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves

Question 46

Preferential trading areas

Answer 46

Are where tariff and other trade barriers are reduced on some but not all goods traded. Members sign a preferential trade agreement to create the area

Question 47

Free trade area

Answer 47

Where all tariffs and quotas are removed on trade in goods between member countries. However each member country can impose tariffs and quotas on imports from outside the bloc

Question 48

Customs union

Answer 48

Where there is free trade within the trading bloc and a common external tariff on goods coming from outside of the bloc

Question 49

Common markets

Answer 49

Customs unions where both labour and capital have freedom of movement within the area and where produce standards and laws concerning free movement of goods and service are commonly held

Question 50

Economic unions

Answer 50

Are where the economies of member countries are as fully integrated as a different regions within a country. It implies both fiscal union (central body controlling taxation and spending) and a monetary union (currency etc)

Question 51

Trade creation

Answer 51

Trade created as a result of the establishment of a free trade agreement/ trading bloc - often a result of the removal of trade barriers

Question 52

Trade diversion

Answer 52

When trade is diverted from efficient exporters outside of the bloc to less efficient producers/exporters inside the bloc - can cancel out any global output gains from

Question 53

Benefits of trading bloc

Answer 53

Trade creation Increase in FDI TNCS gain unrestricted access in selling goods to consumer in the bloc Increase in economic power - a larger trading bloc may be able to represent the countries involved better than if said economies been on their own e.g US can be traded with in EU that wouldn't work on own Monetary unions could also create - elimination of transaction costs - price transparency (consumers can compare prices across borders ) = improved efficiency within bloc - eliminate currency fluctuations between member countries = encourages business investment

Question 54

Costs of a trading bloc

Answer 54

Trade diversion Joining monetary union can sometimes involve transition costs as a country jettisons its old currency for euro e.g Loss of independent monetary policy (lose ability to set own interest rates) ECB controls monetary policy Loss of E.R flexibility - own currencies are lost Trade blocs don't benefit all members equally in every way

Question 55

Characteristics of common markets

Answer 55

No customs posts identical product standards harmonisation of taxes (to prevent distortions within market) Common currency

Question 56

Single market

Answer 56

Often used to reference the common market of the EU

Question 57

Benefit for membership in CU/CM for countries

Answer 57

If trade creation is greater than trade diversion

Question 58

Further advantages of membership in common market

Answer 58

Competition is greater in the SR as custom union eliminates barriers to trade encouraging increased efficiency as UK companies are now competing across the single market EOS - CU allows for national companies to operate and invest across Europe taking advantage of regional variation to lower COP to drive down prices and increase efficiency Different countries paying in diff amounts leads to a transfer of resources within the CM leading to benefits or costs depending on country

Question 59

Further disadv of membership in CM

Answer 59

There are problems with competition in LR as inefficient producers will be eliminated moving the entire single market into the grips of larger monopolies EOS can be difficult to achieve if consumer tastes within the market are not homogenous Real resources can easily flow from richer members of single market to poorer members - they are targets of highly skilled labour immigration and I (reverse happens to poorer members - brain drains and net capital outflows) = increased regional inequalities

Question 60

World trade organisation

Answer 60

Set up in 1995 to replace the GATT. WTO exist to reduce barriers and trade in a series of negations Has 166 member states - comprising over 98% of global trade and GDP

Question 61

Regulate global trade

Answer 61

Ensuring countries abide by signed trade agreements Any country can file complaint with WTO against the competitive practices of another country (trade dispute) Hearing can then occur determining an outcome Winner can legally set up sanctions against the loser if the losing country rejects the outcome WTO acts as intermediary reducing punitive protectionism from one state against another

Question 62

Promotion of trade liberalisation

Answer 62

Talks e.g Doha round Recent topics of debate and settlement include agriculture, commerce and I.P rights Avoid proliferation of regional trade diversion and minimal gains from comparative advantage RTAs can be signed without WTO permission

Question 63

Criticism of WTO

Answer 63

Anti globalist = takes national economic independence from countries and forces them to adopt policies for global community to detriment of their own citizens Environmental Richer countries gains more ability under a free trade set up to mine resources and destroy the environment Development WTO allows richer countries to lower trade barriers whilst relenting to richer keeping them in place. Allows richer countries to force down prices of goods from developing countries whilst allowing their goods to increase in price

Question 64

Protectionism

Answer 64

Represents any attempt by a government to impose restrictions on trade in goods and services between countries Aims to protect domestic industry

Question 65

Reasons for protectionism

Answer 65

To correct deficit in trade in goods and services To prevent a more powerful foreign trading partner dumping cheaper imports into internal markets - potentially undercutting and bankrupting domestic producers Therefore to reduce unemployment To reduce over-dependence on exports and imports dictated by international specialisation (CA) To limit growth of powerful TNCs To protect infant industries within the domestic economy

Question 66

Tariffs

Answer 66

Taxes on imports to a country. This raises the price consumers pay for imports e.g UK (2021) the UK government introduced a temporary import tariff on certain agricultural products, inc beef, lamb and poultry

Question 67

Eval of tariffs

Answer 67

Effect dependent on elasticity of demand. If inelastic, there will be small welfare loss, if elastic there will be bigger decline in welfare and fall in consumption of the good Tariffs may cause production to shift to smaller firms with fewer EOS Issue of retaliation. If one country places tariffs on imports, then retaliation will occur - decline in exports Some jobs may be saved in domestic industry but jobs in export industries will be lost Less disposable income, consumer spending will fall and there will be some decline in output in other sectors

Question 68

Quote

Answer 68

A quota is a physical limit on the quantity of imports a country e.g China has quota on Cambodian rice exports of 300000 tonnes per year

Question 69

Impacts of quotas

Answer 69

Firms see an increase in revenue since production expands Higher price of goods suggest increase in producer surplus Consumers see higher prices so lower consumer surplus Less demand for imports means TOT increase since import prices drop Foreign firms may retaliate Domestic producers expand production inefficiency, leading to loss in world efficiency

Question 70

Subsidies

Answer 70

Act to reduce the costs of production for domestic producers/ firms Makes firms more competitive on the world market, especially against countries where prod has not been subsidised, mainly LEDCs e.g Indian Gov provided extensive support to sugarcane growers

Question 71

Eval on subsidies

Answer 71

Over dependency on export subsidies and producers may fail to improve their cost efficiency. Low productivity is a barrier to long term growth Subsidies are often expensive, diverting state spending away from other growth enhancing areas such as education (opportunity cost) Other countries may regard subsidies as unfair form of protectionism (threat of bringing case to WTO or imposing counter vailing import tariffs)

Question 72

Non tariff barriers

Answer 72

Health and safety regs - pushing out cheaper imports which don't meet defined criteria Environmental regs - pushing out longer distance imports due to emission worries Labelling of products (BRITISH GROWN) Increased bureaucracy - putting off importers with paper work

Question 73

Impact of Non tariff barriers

Answer 73

To disincentivise foreign countries from attempting to export goods to the protectionist economy

Question 74

Pros of protectionism

Answer 74

Reduction in trade deficit because less is imported due to tariffs and quotas on imports Infant industries might need protecting Prevents import dumping where a foreign firm provides exports at a price below cost (predatory pricing) Gov might want to protect domestic jobs May be retaliation against other countries so protects net trade Raises gov rev which can be spent on the economy Avoids risk of overspecialisation

Question 75

Cons of protectionism

Answer 75

Higher prices for consumer leading to loss of CS and choice Loss of world efficiency. domestic producers are producing a good they do not have a comparative advantage in Risk of retaliation, distorts global trade Tariffs lead to greater income inequality as it impact lower income earners far greater than those on higher income

Question 76

Balance of payments

Answer 76

Refers to a record of all international transactions between countries. Consists of a current account, a capital account and financial account

Question 77

Current account

Answer 77

Trade balance in goods (manufactured goods, raw materials, capital tech) Trade balance in services (banking, insurance, tourism, transport, shipping, research, education, health) Net primary income from overseas assets (profits, interest and dividends from I in other countries, net remittance flows from migrant workers) Net secondary income (overseas aid/debt relief, UK payments to EU)

Question 78

Capital account

Answer 78

Sale/transfer of patents, copyright, leases and other transferable contracts (e.g selling of land by businesses) Debt forgiveness/cancellation (counted as -ve) Capital transfers of ownership of fixed assets Old capital account now called financial account

Question 79

Financial account

Answer 79

Includes transactions that result in a change of ownership of financial assets and liabilities between UK residents and non residents Net balance of FDI Net balance of portfolio I flows (equator and debt) Balance of banking flows Changes in value of reserves of gold and foreign currency

Question 80

Displaying balance of payments

Answer 80

BOP must be equal to zero When there are errors, a balancing item is introduced in order to allow for any credits and debits that haven't fully been logged minus signs show disinvestment

Question 81

Increasing international capital flows

Answer 81

Government bonds are increasingly offered to foreign investors to increase credit within a national economy Speculation - gambling on advantageous ER to quickly (dis/re)invest Transfer of private funds abroad e.g tax evasion Overseas loans can be more advantageous when purchasing foreign goods than obtaining a domestic loan and paying exchange costs Banks have found profit in leading to an international audience in the short term

Question 82

Advantages of capital flows

Answer 82

Facilitates trade by financing growth in trade Increased FDI can take the form of technological and info transfer Provision of capital in areas where capital is scarce e.g developing countries

Question 83

Disadvantages of capital flows

Answer 83

Availability of international credit facilities borrowing e.g West Africa in 1970s Over reliance on FDI can lead to security threats e.g Russian I in North Sea oil Disruptions in global financial centres can ripple globally e.g collapse of Lehmann Bros

Question 84

Current account deficit

Answer 84

external deficit net outflow of income from the economy circular flow deficit countries need to run a financial account surplus might be achieved by attracting inflows of financial capital from other countries CuA deficit nation are debtor countries

Question 85

Current account surplus

Answer 85

External surplus net inflow of income into economy allows a country to run a financial account deficit External surplus countries may use accumulated foreign currency reserves to establish a sovereign wealth fund Current account surplus nations are creditor nations

Question 86

Consequences form current account deficit

Answer 86

Loss of AD if there is trade deficit (M>X) which causes weaker GDP growth and reduced living standards and rising unemployment Big current account deficits will cause currency to depreciate leading to higher cost push inflation and a deterioration in TOT Can lead to country running short of vital foreign currency reserves Trade deficit may be reflection of lack of competitiveness / supply side weaknesses in the economy Some may choose to borrow to achieve financial account surplus - risks Unsuitable CuA deficits lead to loss of investor consequence

Question 87

Demand management (current account deficit)

Answer 87

A tightening of fiscal and/or monetary policy reduces real spending power of consumers and leads to lower spending on imports (fall in M improves trade balance) Lower exchange rate reduces the foreign price of exports and makes imports more expensive – causes changes in demand

Question 88

Supply side improvement (CuA deficit)

Answer 88

Policies to raise labour productivity and encourage start-ups with export potential e.g. Life sciences, digital etc. Investment in human capital to boost productive capacity and competitiveness in high-value industries such as bio-technology, engineering, medicine, tourism Protectionism measures such as import quotas and tariffs

Question 89

Exchange rates

Answer 89

Refer to the value of a currency relative to another currency/basket of currencies e.g £1 vs $1.27

Question 90

Factors affecting value of currency

Answer 90

Trade balance - strong + surpluses tend to see currencies appreciate as money flows into circular flow from exports of g + s and from investment income FDI - economy that attracts high FDI will see an increase in currency demand = rising E.R Portfolio investment - strong inflows of portfolio I into equities and bonds from overseas can cause currency appreciation I.R differentials - high I.R can expect to see hot money flowing across the currency markets causing appreciation of E.R

Question 91

Floating exchanging rates

Answer 91

The market determines the value of the currency without government / central bank intervention Exchange rate is set purely by forces of supply and demand

Question 92

Fixed exchange rates

Answer 92

Exchange rate is pegged Occasional realignments e.g. usually a devaluation Day to day, the external value of the currency is usually stable

Question 93

Revaluation and devaluation

Answer 93

Revaluation when a country decides to increase the E.R of its currency under a system of fixed exchange rates Devaluation is when a country decides to decrease the ER of its currency under a system of fixed ER

Question 94

Appreciation and depreciation

Answer 94

Appreciation refers to an increase in the ER of a country's currency under a system of floating ER Depreciation refers to a decrease in the ER of a country's currency under a systems of floating ER

Question 95

Pros floating ER

Answer 95

reduces the need to hold large amounts of currency reserves Freedom to set monetary policy interest rates to meet domestic objectives Insulation for an economy after an economy after an external shock especially for export dependent countries Partial automatic correction for a current readjustment process Less risk of currency becoming significantly over/undervalued

Question 96

Eval of floating ER

Answer 96

Volatility might be detrimental to attracting inward investment Lower, more competitive ER does not necessarily correct a persistent balance of payments deficit immediately Curve and importance of non price competitiveness and constant readjustments

Question 97

Pros fixed ER

Answer 97

Certainty of currency values gives confidence for inward investment Reduced costs of currency hedging for businesses e.g forward markets Stability helps to control inflation i.e discipline on businesses to keep their unit labour costs low Imposes responsibility on gov macro policies Less speculation if the fixed ER is credible

Question 98

Eval of fixed ER

Answer 98

Reduced freedom to use IR for other macro economic objectives many developing countries do not have sufficiency foreign currency reserves to be able to maintain a fixed ER Difficult for countries to use competitive devaluation of their fixed ER which creates political tensions and might lead to a protectionist response Devaluation of fixed ER can lead to surge in cost push inflation - damaging for competitiveness and has regressive effects Devaluation may be against WTO rules

Question 99

Impacts of changes in exchange rates

Answer 99

A devaluation/depreciation of currency would cause a decrease in the foreign currency price of a country's exports and an increase in the domestic price of its imports This would generally cause both an increase in competitiveness of the country's goods and services and an improvement in its balance of payments of the current account

Question 100

Marshall - Lerner condition

Answer 100

States that a depreciation/ devaluation of ER will lead to a net improvement in the trade balance provided that the sum of the price elasticity of demand for exports and imports > 1

Question 101

Further impacts of changes in ER

Answer 101

Devaluation should cause an increase in AD as net exports rise leading to rise in real output. Could lead to an increase in employment levels Increased price in imported commodities will often lead to increase in COP - cost push inflation Depreciation in a currency might tempt foreign investment i.e their foreign currencies brought in from outside would be worth more with depreciated currency

Question 102

Measures of competitiveness

Answer 102

Relative unit labour costs Relative export prices Export prices compared to import prices

Question 105

Benefits of being internationally competitive

Answer 105

Current account surpluses International investment Employment and growth Wage growth Domestic PP

Question 106

Problems of sustaining competitiveness

Answer 106

Short term low wages vs longer term wage rises Price increases over time ER variables Protectionism

Question 107

Supply side policy (competitiveness)

Answer 107

Improvements in education/training will improve labour productivity Tax incentives on investment could stimulate capital productive which could reduce costs Deregulation can increase domestic competitive with the same impact

Question 108

Inflation control (competitivness)

Answer 108

Inflation rises export prices - workers demand higher wages Macro stability encourages firms to save revenue aside for investment - later innovation - more competitiveness