international aspects

Question 1

when does specialisation occur?

Answer 1

when individual, areas, and firms focus their resources on the production of a certain good or service

Question 2

benefits of specialisation

Answer 2

boosted productive capacity
efficiency gains
economies of scale
improved competitiveness 
labour productivity

Question 3

disadvantages of specialisation

Answer 3

overspecialisation
increased cost
low labour mobility
high labour turnover
lack of variety

Question 4

define balance of payments

Answer 4

financial record of a country’s transactions with the rest of the world for a given period of time

Question 5

define visible trade balance

Answer 5

record of the export and import of physical items

Question 6

define invisible trade balance

Answer 6

record of the export and import of non-physical items like banking and tourism

Question 7

define net income flows an transfer

Answer 7

record of a country’s net income earned from capital flows such as dividends

Question 8

how to calculate a country’s current account?

Answer 8

current account= visible trade balance + invisible trade balance + net income flows and transfers

Question 9

when does current account deficit occur?

Answer 9

spend more than you earn
higher import
lower export

Question 10

consequences of current account deficit

Answer 10

reduced aggregate demand
unemployment
imported inflation
lower exchange rate

Question 11

when does current account surplus occur?

Answer 11

earn more than you spend
higher export
lower import

Question 12

consequences of current account surplus

Answer 12

employment
better standard of living
inflation
higher exchange rate

Question 13

policies to deal with current account deficit

Answer 13

fiscal
monetary
supply side
protectionist measures

Question 14

what is an exchange rate?

Answer 14

currency of one country measured in terms of other currencies

Question 15

what is the importance of exchange rates?

Answer 15

used to facilitate international trade

Question 16

two kinds of exchange rate systems

Answer 16

fixed

floating

Question 17

determinants of free floating exchange rate

Answer 17

market forces of demand and supply

Question 18

what occurs if there is a change in the exchange rate in a floating and fixed exchange rate system?

Answer 18

floating: appreciation & depreciation

fixed : revaluation and devaluation

Question 19

possible causes of exchange rate fluctuations

Answer 19

change in demand for exports
change in demand for imports
inflation
fdi
speculation
government intervention

Question 20

consequences of increased exchange rate

Answer 20

consumption increases
export falls
import rises
bop falls
inflation falls 
economic growth falls

Question 21

coping with a strong exchange rate

Answer 21

cutting export prices
seeking alternative overseas suppliers
improving productivity 
surge in production of inelastic goods
mncs

Question 22

free trade would mean that -

Answer 22

international trade has no barriers

Question 23

merits of international trade are

Answer 23

access to resources 
lower prices
economies of scale
greater choice
increased market size
efficiency gains
improved international relations

Question 24

reasons for trade protection

Answer 24

protect infant industries
safeguard domestic jobs
prevent dumping
government revenue
to overcome bop deficit

Question 25

arguments against trade protectionism

Answer 25

distorts market signals
increased cost of production due to lower competition
possible retaliation

Question 26

types of trade protectionism

Answer 26

embargo 
quotas
tariffs
subsidies
administrative barriers