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A-level Economics- Theme 4 > International Competitiveness > Flashcards

International Competitiveness Flashcards

1
Q

What is international competitiveness?

A

Ability to sell 🚘 and 🧹 in domestic and international markets at price and quality that is attractive in those markets

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2
Q

How can competitiveness be MEASURED in terms of?

A

Price and non-price MEASURES

REMEMBER TO INCLUDE BOTH TYPES OF MEASURES IN DISCUSSIONS OF INTERNATIONAL COMPETITIVENESS

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3
Q

How many NON-PRICE MEASURES of international competitiveness are there?

A

4

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4
Q

What are the non-price MEASURES of international competitiveness?

A

1) Quality
2) Design
3) Reliability
4) Availability

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5
Q

How many price MEASURES of international competitiveness are there?

A

3

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6
Q

What are the PRICE MEASURES of international competitiveness?

A

1) Relative unit labour costs
2) Relative export prices
3) Global competitiveness index

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7
Q

How are relative unit labour costs a MEASURE of international competitiveness?

A

Relative unit labour costs directly affect production costs … ⬆️ unit labour costs-> ⬆️ production costs … -> ⬆️ price of 🚘 and 🧹 -> ⬇️ international competitiveness

Measure of labour costs in 1 country reactive to those in another country
Figures converted into single 💴 and expressed as index number to allow for international comparisons

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8
Q

How are relative export prices a MEASURE of international competitiveness?

A

Affected by productivity relative to other countries

… measured in terms of labour productivity (output per worker per hour worked)

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9
Q

How is the global competitiveness index a MEASURE of international competitiveness?

A

Composite measure- based on factors e.g. infrastructure 🌃, macroeconomic stability, health 🏥, education 📚, efficiency in labour and 🚘s market, technological readiness and innovation

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10
Q

What FACTORS INFLUENCE international competitiveness?

A

1) Real exchange rate
2) Wage and non wage costs
3) Other factors:
- Education 📚 and training schemes
- Public sector reform
- Government expenditure
- Incentives for investment
- ⬆️ labour market flexibility

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11
Q

What were the top 10 most competitive countries in 2018?

A

1) 🇺🇸
2) Singapore 🇸🇬
3) 🇩🇪
4) Switzerland 🇨🇭
5) 🇯🇵
6) Netherlands 🇳🇱
7) Hong Kong 🇭🇰 SAR
8) 🇬🇧
9) Sweden 🇸🇪
10) Denmark 🇩🇰

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12
Q

What is the real exchange rate?

A

Nominal exchange rate adjusted to reflect different inflation rates (purchasing power) of 💴ies concerned

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13
Q

How do you work out the real exchange rate?

A

Real exchange rate = nominal exchange rate x domestic price level/foreign price level

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14
Q

How does the real exchange rate formula INFLUENCE international competitiveness?

A

Appreciation- occurs if nominal exchange rate ⬆️ OR if prices of domestic goods ⬆️ relative to foreign prices … domestic goods expensive and … ⬇️ competitive BUT foreign goods cheaper and … ⬆️ competitive
… appreciation-> ⬇️ competitiveness of country’s 🚘s

Depreciation- occurs if nominal exchange rate ⬇️ OR if prices of 🚘 abroad ⬆️ relative to domestic prices … foreign goods more expensive and … ⬇️ competitive BUT domestic goods cheaper and … ⬆️ competitive
… depreciation-> ⬆️ competitiveness of country’s 🚘s

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15
Q

How do wage costs INFLUENCE international competitiveness?

A

If wage costs ⬆️er in 1 country than another country THEN prices of 🚘 in THAT likely to be ⬆️er ASWELL … ⬇️ internationally competitive

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16
Q

How do non-wage costs INFLUENCE international competitiveness?

A

1) Taxes on employing staff (national insurance contributions- paid by EMPLOYERS)
2) Health and safety regulations
3) Environmental regulations
4) Employment protection AND anti-discrimination laws
5) Contribution into company pension schemes

ALL NON-WAGE COSTS ⬇️ INTERNATIONAL COMPETITIVENESS

17
Q

What non-wage costs like in developing and developed economies?

A

⬆️er in developed economies and … ⬇️ international competitiveness of 🚘 and 🧹 from developed countries

18
Q

How do education and training schemes INFLUENCE international competitiveness?

A

⬆️ occupational mobility of labour- affects level of human capital (knowledge and skills of workforce)-> ⬆️ international competitiveness

19
Q

How does public sector reform INFLUENCE international competitiveness?

A

⬇️ regulations-> ⬆️ competition in industry to strive for lower costs hence compete for ⬇️er prices and … ⬆️ internationally competitive

20
Q

How do incentives for investment INFLUENCE international competitiveness?

A

e.g. tax breaks-> investing in R and D-> ⬆️ efficient and cheaper ways of production-> ⬇️er costs-> ⬇️er prices-> ⬆️ international competitiveness

21
Q

How does more labour market flexibility INFLUENCE international competitiveness?

A

Example- use of flexible hour contracts- make it easier to hire and fire workers- allows firms to have optimum number of workers working for optimum number of hours- labour productivity maximised … ✖️ one payed overpaid for work ✖️ needed

22
Q

How does government expenditure INFLUENCE international competitiveness?

A

Example- improving infrastructure e.g. buildings, roads (transport)-> ⬆️ international competitiveness as ⬇️er costs (⬆️ efficiency- e.g. travel costs 💵 and ⏰ saved)

23
Q

What were the 3 least competitive countries in 2018?

A

1) Haiti 🇭🇹
2) Yemen 🇾🇪
3) Chad 🇹🇩

24
Q

Can the U.K. artificially increase its competitiveness?

A

No as international agreements e.g. EU ✖️ allow 🇬🇧 to impose tariffs on other EU countries
ALSO WTO ✖️ allow imposing protectionist measures UNLESS justifiable case

ALSO 🇬🇧✖️⬆️ it’s competitiveness by devaluing its 💴 as it is free floating … controlled by market forces (supply and demand)
ALSO depreciation cannot be engineered by via ⬇️ interest rates as 🏦 of 🏴󠁧󠁢󠁥󠁮󠁧󠁿 independent from government … have ✖️ control over interest rates

25
Q

What are the benefits of being internationally competitive?

A

1) Surplus on balance of trade
2) Export led growth-> ⬆️ in real incomes
3) ⬇️ unemployment
4) ⬆️ FDI

26
Q

What are the negatives of being internationally uncompetitive?

A

1) deterioration in balance of trade (⬇️ exports as ⬇️ internationally competitive)
2) ⬆️ unemployment (industries which export a lot)
3) ⬇️ exports-> ➖ multiplier effect on GDP-> ⬇️ economic growth

A-level Economics- Theme 4 (14 decks)

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