Lesson 30 - Specialisation and Trade

Question 1

Define the term trade?

Answer 1

Trade is the exchange of products between countries. When conditions are right, trade brings benefits to all countries involved and can be a powerful driver for sustained GDP growth and rising living standards.

Question 2

What are the two ways in which trade benefits can be regarded?

Answer 2

Static gains
Dynamic gains

Question 3

Define static gains from trade?

Answer 3

Static gains from trade are measured by the increase in output and lower costs due to countries specialising and trading in those goods that they have a comparative advantage in

Question 4

Define the term dynamic gains from trade?

Answer 4

Dynamic gains from trade are due to the increased competition faced by businesses leading to better quality products, more investment and greater efficiency.

Question 5

What percentage of trade is between developed countries?

Answer 5

50%

Question 6

What percentage of trade is between developed and developing countries?

Answer 6

35%

Question 7

What percentage of trade is between developing countries?

Answer 7

15%

Question 8

What is the name of the policy followed by countries such as Brazil after WW2 that discouraged trade with other countries?

Answer 8

Import substituting industrialisation

Question 9

What is the name of the policy followed by countries in the far east that encourage trade?

Answer 9

Export oriented industrialisation

Question 10

Give two reasons for an increase in trade between countries?

Answer 10

Comparative advantage
Economies of Scale