International Competitiveness

Question 1

Relative Unit Labour Costs

Answer 1

A measurement of labour costs in one country relative to those in another.

Question 2

Relative Export Prices

Answer 2

This can be affected by factors such as labour productivity, which can be measured by output per worker per unit.

Question 3

The Global Competitiveness Index

Answer 3

A composite measure of competitiveness based on factors such as infrastructure, economic stability, health and education.

Question 4

Real Exchange Rate

Answer 4

Real exchange rate = Nominal exchange rate x domestic price level
______________________
foreign price level

Question 5

Factors Influencing International Competitiveness

Answer 5

Real Exchange Rate:
A fall in the nominal exchange rate or rise in foreign price level will cause cause the real exchange rate to fall, which would cause an increase in competitiveness.

Wage/Non-Wage Costs:
High wage costs will cause high production costs, reducing competitiveness.
Non-Wage costs include health and safety/environmental regulations and employment protection laws.

Other factors:
-Education/training schemes
-Deregulation
-Incentives for investment