International Trade And Globalisation

Question 1

What are advantages of Specialisation at a National Level?

Answer 1

Improved efficiency, increased labour productivity, increased productive capacity, economies of scale and improved competitiveness

Question 2

What are Disadvantages of International Specialisation?

Answer 2

1) Overspecialisation ( regional, structural unemployment )- risks not spread
2) High Labour Turnover
3) Low Labour Mobility- receive little training- not flexible- structural unemployment
4) High Labour Cost- Skilled Workers

Question 3

What is Globalisation?

Answer 3

Worlds economies become increasingly interdependent and interconnected

Question 4

What are Advantages of MNCs ?

Answer 4

1) create jobs, living standards improve
2) economies of scale
3) spread risks
4) avoid trade restrictions, reduce transport costs
5) move for lower tax

Question 5

What are Disadvantages of MNCs?

Answer 5

1) Diseconomies Of Scale
2) unethical practices
3) overreliance
4) harm domestic firms
5) can exploit governments
6) fluctuating exchange rates- difficult to measure success

Question 6

What are the Merits of Free Trade?

Answer 6

1) Access to resources
2) Lower Prices
3) Economies of Scale
4) Greater Choice
5) Larger Market Size
6) Increased Efficiency
7) Improved International Relations

Question 7

What is Protection?

Answer 7

Protection is the use of Trade Barriers to restrain foreign trade, and prevent unwanted competition

Question 8

What are Advantages of Protectionism?

Answer 8

1) protect infant industries
2) protect domestic jobs
3) government revenue
4) balance of payments
5) prevent overreliance

Question 9

What are Disadvantages of Protectionism?

Answer 9

1) Distorts Market Signals- global misallocation of resources
2) Efficiency may fall
3) Retaliation

Question 10

What is a Floating Exchange Rate?

Answer 10

Value of the currency determined by market forces of demand and Supply

Question 11

What are Advantages of a Floating Exchange Rate?

Answer 11

1) no cash reserves needed
2) no government intervention needed

Question 12

What are Disadvantages of a Floating Exchange Rate?

Answer 12

1) uncertainty- less investment
2) Imported Inflation

Question 13

What is a Fixed Exchange Rate?

Answer 13

The Central Bank Buys and Sells foreign currency to make sure that value of currency stays at Pegged value

Question 14

What are Advantages of Fixed Exchange Rate?

Answer 14

1) certainty

Question 15

What are Disadvantages of Fixed Exchange Rate?

Answer 15

1) large cash reserves needed to maintain - opp cost
2) cannot use monetary policy- may affect macroeconomic aims