4.1.9 International Competitvness

Question 1

What is ‘International Competitiveness’?

Answer 1

Is the ability of a nation to compete successfully oversees and sustain improvements in real output and living standards

Question 2

What are the two ways to measure international competitiveness?

Answer 2

• relative unit labour cost

- relative export price

Question 3

How does one calculate relative unit labour cost?

Answer 3

Total Labour cost / Output

Question 4

In a term, what is unit labour cost?

Answer 4

How much labour costs per unit of output

Question 5

What is the rule of thumb of unit labour costs and international competitveness?

Answer 5

The cheaper the relative unit cost, the more competitive a country is

Question 6

What is ‘relative export price’?

Answer 6

The ratio of one countries export price relative to another country

Question 7

Give 3 factors that affect a countries international competitiveness?

Answer 7

• interest rates
• exchange rate
• tax policies

Question 8

How do interest rates affect international competitveness?

Answer 8

Low interest rates lead to consumption and investment which has shifted AD. This has allowed businesses to invest more, increasing competitiveness

Question 9

How do exchange rates affect a countries international competitiveness?

Answer 9

A depreciation in the exchange rate makes exports appear cheaper, making them look more attractive to foreign consumers

Question 10

How do tax policies affect a countries international competitiveness?

Answer 10

A lower tax rate provides an incentive to earn more, attracting more skilled labour