International economic issues (AS level)

Question 1

Factor endowment

Answer 1

the availability of capital, enterprise, labour and land in an economy

Question 2

Absolute advantage (international trade)

Answer 2

a situation where, for a given set of resources, one country can produce more of a particular product than another country

Question 3

Opportunity cost ratio

Answer 3

the quantity of one product compared to the quantity of another product that has to be sacrificed to produce it.

Question 4

Comparative advantage (international trade)

Answer 4

a situation where a country can produce a product at a lower opportunity cost than another country

Question 5

Free trade

Answer 5

international trade not restricted by taxes on imports and other policy tools designed to give domestic producers protection from competition from imports

Question 6

Trading possibility curve

Answer 6

a diagram showing the effects of a country specialising and trading

Question 7

Imports

Answer 7

goods and services purchased from other countries

Question 8

Exports

Answer 8

goods and services sold to other countries

Question 9

Terms of trade

Answer 9

a numerical measure of the relationship between export and import prices

Question 10

Protectionism (international trade)

Answer 10

protecting domestic producers from foreign competition

Question 11

Tariff

Answer 11

a tax imposed on imports. Sometimes tariffs may be imposed on exports

Question 12

Absolute poverty

Answer 12

a condition where people’s income is too low to enable them to meet their basic needs

Question 13

Quota

Answer 13

a limit on imports

Question 14

Embargo

Answer 14

a ban on imports and/ or exports

Question 15

Voluntary export restraint

Answer 15

a limit placed on imports reached with the agreement of the supplying country

Question 16

Exchange control

Answer 16

restrictions on the purchases of foreign currency

Question 17

Infant industries

Answer 17

new industries that have a low output and a high average cost

Question 18

Dumping

Answer 18

selling product in a foreign market at below their cost of production

Question 19

Monopoly

Answer 19

where one firm dominated the market due to having a large market share; a pure monopoly is a single seller with 100% market share

Question 20

Current account

Answer 20

a record of the trade in goods, trade in services, primary income and secondary income

Question 21

Dividend payments

Answer 21

a share of a firm’s profits paid to its shareholders

Question 22

Exchange rate

Answer 22

price of one currency in terms of another currency

Question 23

Balance of payments account

Answer 23

a record of a country’s economic transactions with the rest of the world over a year

Question 24

Capital account

Answer 24

within the balance of payments, a record of the sale of purchase of copyrights, patents, trademarks, and money brought into the country by immigrants and taken out by emigrants

Question 25

Financial account

Answer 25

within the balance of payments, a record of the transfer of financial and capital assets between the country and the rest of the world

Question 26

Imbalance in the current account

Answer 26

debit items in the current account not equalling credit items

Question 27

Current account deficit

Answer 27

the value of debit items on the current account exceeding the value of credit items

Question 28

Current account surplus

Answer 28

the value of credit items on the current account exceeding the value of debit items

Question 29

Balance in the current account

Answer 29

debit items in the current account equalling credit items

Question 30

Floating exchange rate

Answer 30

and exchange rate that is determined by the market forces of demand and supply

Question 31

Depreciation

Answer 31

a decrease in the international price of a currency caused by market forces

Question 32

Appreciation

Answer 32

an increase in the international price of a currency caused by market forces

Question 33

Hot money flows

Answer 33

flows of money moved around the world to take advantage of changes in interest rates and exchange rates