International Trade & Business Growth 4.1.2

Question 1

Imports

Answer 1

Goods that are produced overseas but consumed domestically. When someone buys an imported product, the money goes back to the foreign country so imports cause money to flow out of an economy.

Question 2

Exports

Answer 2

Goods that are produced domestically but consumed overseas. When a business sells exported product, they get money from the country they sold it to so exports result in money flowing into an economy.

Question 3

What is specialisation?

Answer 3

It occurs when a country/business decides to focus on producing a particular good/service.

Question 4

Benefits of specialisation

Answer 4

• lower cost per unit due to economies of scale
• lower prices for consumers leading to more sales
• increased profit margins
• increased efficiency as workers become highly skilled - speeds up production and improves quality

Question 5

What is competitive advantage?

Answer 5

Factors that puts a business in a favourable position over competitors. A business can gain advantage by specialising

Question 6

What is FDI?

Answer 6

Foreign direct investment is when a firm from one country invests in a business in another country. This can be merging/taking over an existing business, opening a branch overseas or starting up anew enterprise.

Question 7

Benefits of FDI for businesses

Answer 7

• access to new markets - increase sales as there are more people to sell to and possibly reduce costs
• take advantage of skilled local labour which can increase productivity
• might be able to generate more sales than from exporting due to first-hand knowledge of market
• overcome international tarde barriers

Question 8

Benefits of FDI for countries

Answer 8

• increased economic growth
• increased job opportunities
• access to knowledge and expertise