international trade key terms

Question 1

International competitiveness:

Answer 1

measures the relative costs of a country’s exports

Question 2

Unit labour costs:

Answer 2

Average cost of labour per unit of output produced: Total labour cost / total output

Question 3

Free Trade Areas

Answer 3

Members agree to either reduce or eliminate trade barriers for all goods and services. This is known as trade liberalisation.

Question 4

Customs Unions:

Answer 4

Members agree to the removal of trade barriers amongst themselves and a common approach to trade barriers when dealing with countries outside of the bloc

Question 5

Common Markets

Answer 5

: Members agree to the removal of trade barriers as well as the freedom of movement of factors of production within the bloc and common product standards

Question 6

Monetary Union

Answer 6

Comprises of the features of both a customs union and a common market, with the addition of a single currency, central bank and monetary policy

Question 7

Trade creation:

Answer 7

The removal of trade barriers within a trading bloc, allowing firms to buy from the cheapest supplier and increasing intra-bloc trading.

Question 8

Trade diversion:

Answer 8

When trade barriers imposed on non-members means that trade is diverted away from cheaper non-members.

Question 9

The World Trade Organisation:

Answer 9

An organisation of 160 countries promoting free trade agreements, settling trade disputes between governments, and organising trade negotiations

Question 10

Trade liberalisation:

Answer 10

: The reduction or removal of protectionist measures.

Question 11

Economic Integration:

Answer 11

The process of lowering trade barriers and moving from protectionism to an FTA, then custom union, then common market and then monetary union.

Question 12

items and examples of current account

Answer 12

1. Exports of goods and servicesInflow – education
2. Imports of goods and servicesOutflows ford,energy
3. Net primary income (balance of inflows and outflows)Wages – remittances
   Profit – repatriated MCN
4. Net secondary income (balance of inflows and outflows)Aid

Question 13

items and examples of capital account

Answer 13

shahs

Question 14

items and examples of fiancical account

Answer 14

6. Direct investment (balance of inflows and outflows)
   FDI – buying machinery, head office building – capital
7. Portfolio investment (balance of inflows and outflows) Hot money inflows – saving stock markets bonds and speculation – short term and noyt capital
8. Reserve assets (Use of foreign exchange reserves)
   Foreign currency reserves – government