4.1.9: International Competitiveness Flashcards
What is international competitiveness?
The ability of a nation to compete successfully overseas and sustain improvements in real output & living standards.
What are the measures of international competitiveness?
-Relative unit labour costs.
-Relative export prices.
What are relative unit labour costs?
The cost of labour per unit of output.
What do high unit labour costs indicate?`
-Low productivity.
-Low international competitiveness.
What are relative export prices?
The price of a nation’s exports compared to the prices of exports worldwide.
What do high export prices indicate?
-Low international competitiveness.
What are the factors influencing international competitiveness?
-Unit labour costs.
-Economic stability.
-Regulation.
-Inflation.
-Openness to trade.
What is an example of unit labour costs influencing international competitiveness?
China’s large population means that wages are relatively low.
How does economic stability influence international competitiveness?
If the country is seen as unstable, there will be little long-term investment, reducing competitiveness.
How does regulation influence international competitiveness?
Low ‘red tape’ encourages investment and competition, so domestic firms can becomes more internationally competitive.
How does inflation influence international competitiveness?
Low inflation increases competitiveness, as UK goods increase in price at a slower rate than goods in other countries.
How does openness to trade influence international competitiveness?
Trade barriers will be low, so other countries are likely to have low barriers on goods coming from the UK.
What are benefits of being internationally competitive?
-Improvement in the current account of the balance of payments.
-Reduction in unemployment.
-Increase in economic growth from export-led growth (rise in net exports -> rise in AD -> multiplier effect on national income).
What are problems of being internationally uncompetitive?
-Deficit in the current account of the balance of payments.
-Increase in unemployment.
-Depreciation in the currency’s exchange rate.
