International Trade

Question 1

Define Free Trade

Answer 1

Occurs when there are no protectionism to importing or exporting

Question 2

What are the Advantages of free trade

Answer 2

Lower price for consumers

Increased Productivity and competitiveness as open markets.

Increased Economic efficiency (comparative advantages)

Increased economies of scale

Question 3

What are the Disadvantages of free trade

Answer 3

Loss of Domestic Industries

Job displacement

Income Inequality

Negative impact on small businesses against huge global firms

Question 4

Define Comparative advantage

Answer 4

If a country can produce good x with a lower opportunity cost than another country its said to have a comparative advantage of production of good X, based on opportunity cost.

Question 5

Define Absolute Advantage

Answer 5

A country has absolute advantage if the production of one good has an equal quantity of resources can produce more of the good than another country.

Question 6

What does Terms of Trade mean

Answer 6

is a measure of a country’s export prices relative to its import prices

Question 7

How do you measure Terms of Trade

Answer 7

Average export prices index / Average import prices index x100

Question 8

How does the term of Trade improve?

Answer 8

If export prices increase compared to import prices, the term of trade improves.

Question 9

Define Protectionism

Answer 9

Protectionism refers to government policies and interventions designed to protect domestic industries from foreign competition.

Question 10

What are the types of Protectionism

Answer 10

Tariffs
Quotas
Anti-Dumping Measures
Subsidies

Question 11

Define Tariffs

Answer 11

Tariffs are taxes imposed on imported goods. By increasing the cost of foreign goods, tariffs make them less competitive compared to domestically produced goods.

Question 12

Define Quotas

Answer 12

Quotas set limits on the quantity or value of specific goods that can be imported during a specified period.

Question 13

Define Subsidies

Answer 13

Subsidies, Governments may provide financial assistance or subsidies to domestic industries, making their products more competitive in the global market.

Question 14

Define Anti-Dumping Measures

Answer 14

Anti-Dumping Measures are designed to counteract the negative effects of dumping, which is when a country exports goods at prices lower than their normal value.

Question 15

What are the advantages of Protectionism

Answer 15

Domestic industry protection, can shield domestic industries from intense foreign competition

Job Preservation, by limiting imports and promoting domestic production, protectionist measures can help preserve jobs in certain industries.

Infant Industry Protection suggests that new industries need protection during their early stages to compete against established foreign competitors.

Question 16

What are the disadvantages of Protectionism

Answer 16

Higher Prices for consumers - Trade barriers, such as tariffs and quotas, can lead to higher prices for imported goods.

Reduced Export Opportunities - Protectionism limits the access of domestic industries to foreign markets.

Loss of Comparative Advantage Protectionism may prevent countries from benefiting from comparative advantage—the ability to produce goods and services at a lower opportunity cost.

Trade Wars - Trading partners may respond to protectionist measures with their own trade barriers, leading to a cycle of retaliation.

Question 17

Define Globalisation

Answer 17

Globalisation is a process of deeper economic integration between countries and regions of the world.

Question 18

Advantages of Globalisation

Answer 18

Greater free trade

Greater movement of labour

Lower prices

Increased global investment

Question 19

Drawbacks of Globalisation

Answer 19

Environmental costs

All connected countries are more vulnerable to external shocks

Tax Avoidance

Labour loss, labour works move to different countries.

Question 20

What does the WTO (World Trade Organisation) do?

Answer 20

The role of the WTO is to negotiate trades such as resolve disputes, create and implement trade agreements.

Question 21

What Principles does the WTO follow

Answer 21

non-discrimination

reciprocity

transparency

seeking to create an open and predictable international trading system.

Question 22

What are the Major UK exports

Answer 22

Manufactured goods

Oil and Gas

Food and beverages

Chemicals and Pharmaceuticals

Question 23

What is the formula for index numbers

Answer 23

Index =Current value/Base period x 100

Question 24

Define capital flows

Answer 24

The movement of money for the purpose of investment, trade, or business operations