Macro 3

Question 1

Benefits of free trade on producers (3)

Answer 1

Enables specialisation
Selling to a large market
Can take advantages of economies of scale

Foreign suppliers of raw materials are cheap
Low costs of production/ no tariffs
Better quality raw materials

Import new technology
Ideas on new production methods
Lower costs of production

Question 2

Problems of free trade on producers (4)

Answer 2

Increases competition from other producers
Higher costs cause domestic costs to go out of business
Need protection to survive

Inflation of imports (raw materials)
Increases costs of production

Unable to compete when dumping
Out of business

Question 3

Benefits of specialisation (2)

Answer 3

Increases productivity
Higher output

Good reputation of products/ high quality
Increases demand

Question 4

A fall in the value of the currency means…

Answer 4

… that more of the currency has to be sold to buy a given unit of another currency

Reduces export prices and increases import prices

Question 5

Reasons why a cut in interest does not end deflation

Answer 5

Interest rates could already be low do a cut makes no difference

People are pessimistic about the future
May not spend, borrow/ invest despite lower interest rate
May choose to repay debts