4.1.3 - Pattern of trade

Question 1

What’s absolute advantage?

Answer 1

This is when a country can supply goods using fewer resources than another country.

Question 2

What’s comparative advantage?

Answer 2

Comparative advantage refers to the relative advantage that one country or producer has over another. Countries can benefit from specializing in and exporting the product(s) for which it has the lowest opportunity cost of supply.

Question 3

What’s an emerging economy?

Answer 3

An emerging economy is one in which the country is becoming a developed nation often driven by relatively high economic growth and a rapid expansion of trade and investment flows.

Question 4

Name 2 reasons for changes in tarde

Answer 4

• Changes in comparative advantage
• Growth of developing countries
• Growth of trading blocs
• Change in exchange rates

Question 5

Why would the growth of developing countries mean change in trade?

Answer 5

BRIC and MENA (Middle East and North Africa) creates cheaper labour access to raw materials. This means you can outsource and have offshore production assembly.

Question 6

Why would a change in exchange rates mean a change in trade?

Answer 6

If the GBP (or any other currency) is strong against another currency, the other countries exchange rate making them more attractive. Therefore, it’ll be cheaper to set up there.

Question 7

What’s a bilateral trade agreement?

Answer 7

The exchange of goods or services between two nations promoting trade in goods and services and flows of foreign investment.

Question 8

What’s a multilateral trade agreement?

Answer 8

Trade agreement between more than two countries.

Question 9

What does BRIC stand for?

Answer 9

Brazil, Russia, India and China

Question 10

What does MENA stand for?

Answer 10

Middle East/North Africa