International Competitiveness

Question 1

What are the measures of competitiveness? (2)

Answer 1

1. Relative export prices

2. Relative unit labour costs

Question 2

What is relative export prices?

Answer 2

Relative cost of uk exports to other countries

Question 3

What is relative unit labour?

Answer 3

Employing workers to produce one unit labour cost. If wages increases but labour productivity decreases, unit labour cost increases.

Question 4

Factors influencing international competitiveness? (5)

Answer 4

1. Labour productivity
2. Relative inflation rates
3. Levels of infrastructure
   4 . Cost of business
4. Exchange rates

Question 5

How does labour productivity influence international competitiveness?

Answer 5

If German productivity rises faster than the UK they are more competitive

Question 6

What affects labour productivity? (4)

Answer 6

1. Levels of education and training
2. Mobility of labour
3. Motivation of workers
4. Technology

Question 7

How do relative inflation rates influence the international competitiveness?

Answer 7

If the uk inflation drops it makes us more competitive

Question 8

How to levels of infrastructure influence the international competitiveness?

Answer 8

Troubles with transport– and increase in costs and decrease in competitiveness

Question 9

How do the cost of the business influence the international competitiveness?

Answer 9

Regulation and taxes— if they increase then competitiveness drops

Question 10

How to exchange rates influence international competitiveness?

Answer 10

An undervalued exchange rate will male exports competitive

Question 11

Measures to increase competitiveness? (6)

Answer 11

1. Education and training
2. Investment and infrastructure
3. Privatisation and deregulation
   4 . Devaluation in exchange rates
4. Limiting wage growth
5. Flexible labour markets

Question 12

How does education and training increase competitiveness? And decrease

Answer 12

An increase in labour productivity

However – takes years

Question 13

How does investment in infrastructure increase competitiveness? And decrease

Answer 13

Transport costs drop and an increase in productivity

However– expensive and takes time

Question 14

How does privatisation and deregulation increase competition?

Answer 14

If efficiency increases from incentives of competition and private sector

Question 15

How does a devaluation in the exchange rates increase competition? And decrease?

Answer 15

Increase in competition and exports cheap

— however leads to inflation and misses key issues

Question 16

How does limiting wage growth increase competitiveness? And decrease

Answer 16

Increases productivity

– however difficult for government

Question 17

How does a flexible labour market increase competitiveness? And decrease?

Answer 17

Drops labour costs and encourages firms to invest and grow

— however can lead to limited regulation

Question 18

Benefits of being internationally competitive? (5)

Answer 18

1. Rising exports
2. Improved current account
3. Low inflation
4. Higher living standard- afford more imported goods
5. Lower unemployment

Question 19

Problems of being internationally competitive and how ? (2)

Answer 19

1. Appreciation could damage growth– competitiveness causes a rise in exchange rates and makes exports less competitive
2. Economy may become too reliant on exports– if economy becomes reliant on cheap exports it will be more vulnerable to a downturn in the global economy