QUIZ #1/PRE-LIM_PBO

Question 1

• The activity of making, providing, purchasing, or selling goods or services.
• Any action that involves producing, distributing, or consuming products or services is an ______________
• Any activities involving money or the exchange of products or services

Answer 1

Economic Activity

Question 2

• The monetary value of all finished goods and services made within a country during a specific period.
• Provides an economic snapshot of a country, used to estimate the size of an economy and growth rate.
• a key tool to guide policymakers, investors, and businesses in strategic decision making.

Answer 2

Gross Domestic Product (GDP)

Question 3

GDP can be calculated in three ways, using ________, _________, or_________. It can be adjusted for inflation and population to provide deeper insights.

Answer 3

E- Expenditures
P- Production
I- Incomes

Question 4

A financial metric that breaks down a country’s economic output per person and is calculated by dividing the GDP of a nation by its population.

Answer 4

Per Capita GDP

Question 5

is the total market value of all final goods and services produced within a country in a specific time period, measured using current prices without adjusting for inflation or deflation.

Answer 5

Nominal GDP

Question 6

Measures the value of the goods and services produced by an economy in a specific period, adjusted for price changes.

Answer 6

Real GDP

Question 7

It measures the inflation that compares the Nominal GDP (the total value of goods and services produced at current prices) to the Real GDP (the total value of goods and services produced at constant prices).

Answer 7

GDP Deflator

Question 8

• measures output per labor hour.
• is largely driven by investment in capital, technological progress, and human capital development.

Answer 8

Labor Productivity

Question 9

Nominal GPD formula?

Answer 9

Consumer Spending + Government spending + Business Investment + (net exports)

or

Quantity x Current Price

Question 10

Real GDP formula?

Answer 10

Nominal GDP divided by GDP deflator

or

Nominal GDP divided by Price Index multiplied by 100

Question 11

Consumption of final goods (i.e., not capital goods or investment assets) is the result of and ultimate motivation for economic activity.

Answer 11

Consumer Spending

Question 12

Income retained for future spending is called

Answer 12

Saving

Question 13

The GDP is considered as the single most important economic indicator to watch. If consumers provide fewer revenues for a given business or within a given industry, companies must adjust by reducing _______, ________, or Innovating and Introducing newer and better products and services.

Answer 13

Cost
Wages

Question 14

Consumption is financed primarily out of our income. Therefore, ________ will be an important determinant, but consumer spending is also influenced by other factors, such as interest rates, inflation, confidence, saving rates and availability of finance.

Answer 14

Real Wages

Question 15

• Refers to economy-wide fluctuations in production, trade, and general economic activity.
• From a conceptual perspective, the__________ is the upward and downward movements of levels of GDP (gross domestic product) and refers to the period of expansions and contractions in the level of economic activities (business fluctuations) around a long-term growth trend.

Answer 15

“Business cycle” (or economic cycle or boom-bust cycle)

Question 16

Consumption is financed primarily out of our income. Therefore, real wages will be an important determinant, but consumer spending is also influenced by other factors, such as _________, __________, __________, _________ and ______________.

Answer 16

I- Interest rates
I- Inflation
C- Confidence
S- Saving rates
A- Availability of Finance

Question 17

The term “Business cycle” (or_________or __________ cycle)

Answer 17

Economic Cycle or Boom-bust cycle

Question 18

The Business Cycle

Answer 18

P- Peak
R- Recession
D- Depression
E- Expansion

Question 19

Don’t lose hope, Kyle

Answer 19

God is always here for you

Question 20

is characterized by increasing employment, economic growth, and upward pressure on prices.

Answer 20

Expansion

Question 21

is the highest point of the business cycle, when the economy is producing at maximum allowable output, employment is at or above full employment, and inflationary pressures on prices are evident.

Answer 21

Peak

Question 22

Following a peak, the economy typically enters into a correction which is characterized by a
__________ where growth slows, employment declines (unemployment increases), and pricing
pressures subside.

Answer 22

Contraction

Question 23

The slowing ceases at the ________ and at this point the economy has hit a bottom from which the
next phase of expansion and contraction will emerge.

Answer 23

Through

Question 24

• is the rate at which the prices for goods and services increase. _____ of ten affects the buying capacity of consumers.

Answer 24

Inflation

Question 25

Causes of Inflation

Answer 25

M- Money supply
N- National Debt
D- Demand-Pull Effect
C- Cost-Push Effect
E- Exchange Rates

Question 26

Excess _________ in an economy is one of the primary causes of inflation. This happens when the _______ in a nation grows above the economic growth, therefore reducing the value of the currency.

Answer 26

Money Supply

Question 27

There are a number of factors that influence ________, which include the nations borrowing and spending.

Answer 27

National Debt

Question 28

States that in a growing economy as wages increase within an economy, people will have more money to spend on goods and services. The increase in demand for goods and services will result in companies to raise prices that consumers will bear in order to balance supply and demand.

Answer 28

Demand-Pull Effect

Question 29

Great work, Kyle!

Answer 29

Jesus is always here for you

Question 30

This theory states that when companies face increased input costs on raw materials and wages for manufacturing consumer goods, they will preserve their profitability by passing the increased production cost to the end consumer in the form of increased prices.

Answer 30

Cost-Push Effect

Question 31

An economy with exposure to foreign markets mostly functions on the basis of the dollar value. In a trading global economy, ____________ play an important factor in determining the rate of inflation.

Answer 31

Exchange Rates

Question 32

is generally the decline in the prices for goods and services that occur when the rate of inflation falls below 0%. __________ will take place naturally, if and when the money supply of an economy is limited.

Answer 32

Deflation

Question 33

-are the terms at which money or goods today may be traded off for money or goods at a future date.
-is a key variable in our choice between consumption now or in the future.
-is also the price of money. We can choose to store our savings in the form of cash or in a current account.
-is also used as an instrument in economic policy.

Answer 33

Interest Rates

Question 34

is the act of allocating resources, usually money, with the expectation of generating an income or profit.

Answer 34

Investing

Question 35

the money that a person, rather than a business or organization, keeps in an account in a bank or similar financial organization

Answer 35

Personal Savings

Question 36

Two types of Stock

Answer 36

Common
Preferred

Question 37

is a form of security that indicates the holder has proportionate ownership in the issuing corporation.

Answer 37

Stock

Question 38

• are units of corporate debt issued by companies and securitized as tradeable assets.
• referred to as a fixed income instrument since ________ traditionally paid a fixed interest rate (coupon) to debtholders.

Answer 38

Bonds

Question 39

is a very low-risk investment. You give a bank a certain amount of money for a predetermined amount of time. When that time period is over, you get your principal back, plus a predetermined amount of interest.

Answer 39

Certificates of Deposit

Question 40

• is a pool of many investors’ money that is invested broadly in a number of companies.
• can be actively managed or passively managed. An actively managed fund has a fund manager who picks companies and other instruments in which to put investors’ money. (Smart asset)

Answer 40

Mutual Funds

Question 41

Investment Activities that promote economic growth

Answer 41

P- Personal Saving
S- Stock Investment
B- Bonds
C- Certificates of Deposit
M- Mutual Funds

Question 42

refers to a product or service produced in one country but sold to a buyer abroad.

Answer 42

Export

Question 43

is the difference between the value of a country’s imports and exports for a given period and is the largest component of a country’s balance of payments (BOP).

Answer 43

Balance of Trade (BOT)

Question 44

is a statement of all transactions made between entities in one country
and the rest of the world over a defined period of time, such as a quarter or a year.

Answer 44

Balance of payments (BOP)

Question 45

consists of a nation’s imports and exports of capital and foreign aid.

Answer 45

Capital Account

Question 46

What is the effect of foreign investments on the national income of the investing? and host nations? Answer me in simple terms in paragraph with atleast 5 sentences

Answer 46

Foreign investments can have significant effects on the national income of both the investing (home) and host nations. For the home country, foreign investments often lead to increased income through repatriated profits, as companies earn returns on their investments abroad. This can boost the overall national income, contributing to economic growth. However, if companies invest heavily overseas, it may also result in job losses domestically as production shifts to countries with cheaper labor, potentially reducing national income in the long term.
In the host country, foreign direct investment (FDI) can stimulate economic growth by providing capital, technology, and expertise that may not be available locally. This influx can enhance productivity and create jobs, thereby increasing the host nation’s national income. Additionally, MNCs often contribute to the local economy through taxes and spending on local suppliers. However, there are potential downsides; profits earned by foreign firms may be repatriated back to the home country instead of being reinvested locally, which can limit the long-term benefits for the host nation. Overall, while foreign investments can boost national incomes in both countries, they also come with challenges that need careful management

Question 47

Determinants of Exchange Rates

Answer 47

Differentials in Inflation
Differentials in Interest Rates
Current Account Deficits
Public Debt
Terms of Trade
Strong Economic Performance

Question 48

is the balance of trade between a country and its trading partners, reflecting all payments between countries for goods, services, interest, and dividends.

Answer 48

Current account

Question 49

Major Components of Business Environment

Answer 49

1. Economic environment
2. Social environment
3. Political environment (government affairs)
4. Legal environment (laws and legislations)
5. Technological (new equipment and machineries)

Question 50

has facilities and other assets in at least one country other than its
home country.
-generally, has offices and/or factories in different countries and a centralized
head office where they coordinate global management.

Answer 50

Multinational Corporation (MNC)

Question 51

is the only global international organization dealing with the rules of
trade between nations.

Answer 51

The World Trade Organization (WTO)

Question 52

was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Fathers
of ASEAN, namely Indonesia, Malaysia, Philippines, Singapore and Thailand.

Answer 52

The Association of Southeast Asian Nations, or ASEAN

Question 53

Functions of WTO

Answer 53

A 1. Administering WTO trade agreements
F 2. Forum for trade negotiations
H 3. Handling trade disputes
M 4. Monitoring national trade policies
T 5. Technical assistance and training for developing countries
C 6. Cooperation with other international organizations

Question 54

Why Gross Domestic Product is so important to Economists (10 points) and Investors?

Answer 54

Gross Domestic Product (GDP) is crucial for economists and investors as it serves as a primary indicator of a country’s economic performance. It measures the total value of all goods and services produced within a nation’s borders over a specific period, providing insights into economic health and growth trends12. For economists, GDP helps assess whether an economy is expanding or contracting, allowing policymakers to make informed decisions regarding monetary and fiscal policies24. Investors closely monitor GDP growth rates because they correlate with corporate profitability; a growing economy typically leads to higher stock prices and investment returns14. Furthermore, GDP data can guide investors in identifying emerging markets that may offer lucrative opportunities for investment based on their growth trajectories12. Overall, understanding GDP is essential for making strategic economic decisions and investments in today’s interconnected global economy.

Question 55

Types of Multinationals

Answer 55

D- 1. A decentralized corporation with a strong presence in its home country.
G- 2. A global, centralized corporation that acquires cost advantage where cheap resources are available.
G- 3. A global company that builds on the parent corporation’s R&D.
T- 4. A transnational enterprise that uses all three categories.

Question 56

Which is better for the economy, investment or spending?

Answer 56

Determining whether investment or spending is better for the economy depends on the context, as both play vital roles. Consumer spending is crucial for driving immediate economic activity; when people spend money, businesses see increased sales, which can lead to job creation and short-term growth. On the other hand, investment focuses on long-term economic health by funding infrastructure, technology, and education, enhancing productivity and contributing to sustained growth over time. During recessions, encouraging consumer spending can help stimulate the economy and prevent further downturns, while in periods of growth, higher investment supports continued expansion. Ultimately, a balanced approach that incorporates both spending and investment is ideal for a healthy economy; spending boosts immediate demand, while investment lays the groundwork for future prosperity, making it essential to strike a balance between the two for optimal economic performance.

Question 57

Would you recommend raising interest rates in an environment of raising inflation and unemployment?

Answer 57

Raising interest rates in an environment of rising inflation and unemployment can be a tricky decision. Higher interest rates are typically used to combat inflation by making borrowing more expensive, which can reduce spending and slow down price increases. However, in a situation where unemployment is also rising, increasing rates could make it harder for businesses and consumers to borrow money, potentially leading to even more job losses. This could worsen the economic situation by reducing overall demand. Therefore, it may be better to consider other measures, such as targeted fiscal policies or support for specific sectors, rather than raising interest rates, as doing so could harm both economic growth and employment. Balancing the need to control inflation while supporting job creation is crucial in such a scenario.

Question 58

Among the five investment activities mentioned above, what you think is the safest and yet profitable?
Justify your answer

Answer 58

Among the five investment activities mentioned, Certificates of Deposit (CDs) are often considered the safest and yet profitable option. CDs are time deposits offered by banks that pay a fixed interest rate over a specific period, usually ranging from a few months to several years. They are insured by the Federal Deposit Insurance Corporation (FDIC) up to a certain amount, which means your money is protected even if the bank fails. While the returns on CDs may not be as high as stocks or mutual funds, they provide a guaranteed return on your investment, making them a low-risk choice. This combination of safety and steady interest makes CDs an attractive option for those who want to grow their savings without taking on much risk.

Question 59

How does an increase in the population growth rate affect economic growth?

Answer 59

An increase in the population growth rate can have both positive and negative effects on economic growth. On the positive side, a larger population means more people available to work, which can lead to higher productivity and increased production of goods and services. This boost in labor can help drive economic growth as more products are made to meet the needs of a growing population. However, if the population grows too quickly, it can lead to challenges such as higher demand for resources like housing, food, and healthcare, which may not keep up with supply. This imbalance can cause prices to rise and potentially lead to economic strain, especially in developing countries that may lack the necessary infrastructure. Ultimately, while population growth can stimulate economic activity, it must be managed carefully to ensure that it does not outpace the economy’s ability to provide for its citizens.

Question 60

Countries Including in North American free trade agreement (NAFTA)

Answer 60

USA
CHINA
CANADA
MEXICO
JAPAN
GERMANY

Question 61

The formula for calculating the Balance of Trade (BOT)

Answer 61

Total value of IMPORTS minus the total
value of EXPORTS.

Question 62

A _________ in the current account shows the country is spending more on foreign trade than it is earning, and that it is borrowing capital from foreign sources to make up the deficit

Answer 62

Deficit

Question 63

A large debt encourages inflation, and ifinflation is high, the debt will be serviced and ultimately paid off with cheaper real dollars in the future.

Answer 63

Public Debt

Question 64

A ratio comparing export prices to import prices, the ______________________ is related to current accounts and the balance of payments. If the price of a country’s exports rises by a greater rate than that of its imports, its terms of trade have favorably improve

Answer 64

Terms of Trade

Question 65

Foreign investors inevitably seek out stable countries with _______________________ in which to invest their capital. A country with such positive attributes will draw investment funds away from other countries perceived to have more political and economic risk.

Answer 65

Strong Economic Performance

Question 66

GDP, Income level, Profit earning rate, Productivity and employment rate, industrial monetary and etc.

Answer 66

Economic Environment

Question 67

custom,traditions of the society,
level of the people living in the society where business exists

Answer 67

Social Environment

Question 68

-are taxes imposed upon wares, articles or merchandize that are imported into or exported from a specific State.
-are a type of protectionist trade barrier that can come in several forms.
-are paid by domestic consumers and not the exporting country, but they have the effect of raising the relative prices of imported products.

Answer 68

Tarrifs

Question 69

is a duty on the imported commodity

Answer 69

Import Tariff

Question 70

is a duty on the exported

Answer 70

Export Tarrif

Question 71

Why Are Tariffs and Trade Barriers Used?

Answer 71

R - 1. To raise tariff revenue
L - 2. To lower the quantity of imports
P - 3. To protect domestic suppliers
P - 4. To prevent job loss
P - 5. To prevent a reduction of worker’s income A - 6. To achieve investment objectives (PTTC)

Question 72

Types of Trade Measures

Answer 72

S- Specific Tarrifs
A - Ad Valorem Tarrifs
C - Compound Tarrifs

Question 73

A fixed fee levied on one unit of an imported good is referred to as

Answer 73

Specific Tarrifs

Question 74

The phrase “___________” is Latin for “according to value,” and this type of tariff is levied on a good based on a percentage of that good’s value.

Answer 74

Ad Valorem Tarrifs

Question 75

is a combination of an ad valorem and a specific tariff.

Answer 75

Compound Tarrifs

Question 76

Non-Tariff Measures/Barriers to Trade

Answer 76

L - 1. Licenses (Health, Sanitary, and Phytosanitary Regulations
I - 2. Import Quotas
V - 3. Voluntary Export Restraints (VER)
L - 4. Local Content Requirement

Question 77

A _________ is granted to a business by the government and allows the business to import a certain type of
good into the country.

Answer 77

Licenses

Question 78

is a restriction placed on the amount of a particular good that can be imported. This sort of
barrier is often associated with the issuance of licenses.

Answer 78

Import Quotas

Question 79

This type of trade barrier is “voluntary” in that it is created by the exporting country rather than the importing
one
- is usually levied at the behest of the importing country and could be accompanied by a reciprocal VER

Answer 79

Voluntary Export Restraints (VER)

Question 80

Instead of placing a quota on the number of goods that can be imported, the government can require that
a certain percentage of a good be made domestically.
-The restriction can be a percentage of the good itself
or a percentage of the value of the good.

Answer 80

Local Content Requirement

Question 81

Typically, a country with a consistently lower inflation rate exhibits a rising currency value, as its
purchasing power increases relative to other currencies

Answer 81

Differentials in Inflation

Question 82

Interest rates, inflation, and exchange rates are all highly correlated - By manipulating interest rates,
central banks exert influence over both inflation and exchange rates, and changing interest rates impact
inflation and currency values

Answer 82

Differentials in Interest Rates

Question 83

I. Why imported goods must pass through the customs office whether taxable or not?

Answer 83

Imported goods must pass through customs offices for several important reasons, regardless of whether they are taxable. First, customs authorities need to verify the legitimacy of the goods being imported, ensuring that they comply with national laws and regulations. This process also helps prevent the entry of illegal or harmful items into the country. Second, customs officials assess the value of the imported goods, which is crucial for determining any applicable duties and taxes, even if some items may be exempt from such charges13.
Moreover, customs procedures ensure that all necessary documentation is submitted, which includes invoices and shipping details that help in accurately calculating any potential import duties24. Additionally, passing through customs allows for the enforcement of trade agreements and tariffs that might affect how goods are treated upon entry2. Finally, this process aids in maintaining a record of imports for statistical and regulatory purposes, which is essential for economic planning and monitoring trade flows

Question 84

A. Why would it be useful to examine a country’s balance of payments data?

Answer 84

Examining a country’s balance of payments (BOP) data is useful for several reasons. First, it provides a comprehensive overview of a nation’s economic transactions with the rest of the world, including imports, exports, and capital flows. This information helps policymakers understand whether the country is earning more from its exports than it spends on imports, which is crucial for assessing economic health. Second, BOP data can indicate trends in foreign investment and trade, allowing governments to formulate effective economic policies to encourage growth or address deficits13.
Additionally, it serves as a tool for investors to gauge the stability and attractiveness of a country’s economy, influencing their decisions on where to invest45. Lastly, analyzing BOP data helps identify potential economic issues early on, such as excessive borrowing or trade imbalances, enabling proactive measures to maintain financial stability23. Overall, the balance of payments is essential for understanding a country’s economic position in the global market.

Question 85

Is the largest provider of “Aid for Trade,” a
multilateral initiative designed to assist developing countries, especially low-income countries, spur growth
by integrating into the world economy.

Answer 85

Bank Group

Question 86

What will be the implication if a country’s imports are greater value than it exports?

Answer 86

When a country’s imports exceed its exports, it creates a situation known as a trade deficit. This means that more money is leaving the country to pay for foreign goods than is coming in from selling domestic products abroad. Over time, a persistent trade deficit can lead to economic challenges, such as increased national debt, since the country may need to borrow money to finance the gap. Additionally, relying heavily on imports can weaken local industries, as consumers might prefer cheaper foreign products over domestic ones, potentially leading to job losses in those sectors.
Moreover, a trade deficit can affect the value of the country’s currency; if investors perceive that the economy is weak due to high imports, it may lead to a depreciation of the currency. This depreciation can make imports more expensive and worsen inflation, as prices for goods rise. Ultimately, while some imports are necessary for economic growth and consumer choice, an imbalance where imports consistently outpace exports can signal underlying economic issues that need to be addressed.

Question 87

What is meant by foreign exchange risk? How can foreign exchange risks be covered in the spot,
forward, futures, or options markets?

Answer 87

Foreign exchange risk, also known as currency risk, is the potential for financial losses that a company or investor may face due to fluctuations in currency exchange rates. When businesses engage in international transactions, changes in the value of currencies can impact the cost of goods or services, leading to unexpected expenses or reduced profits. For example, if a company agrees to pay for goods in a foreign currency, and that currency appreciates before payment is made, the cost in the company’s home currency will increase, resulting in a loss.
To manage this risk, companies can use various financial instruments in different markets. In the spot market, they can buy or sell currencies for immediate delivery at current exchange rates. Forward contracts allow businesses to lock in an exchange rate for a future date, providing certainty about costs. Futures contracts work similarly but are standardized and traded on exchanges, making them more accessible. Lastly, options give companies the right, but not the obligation, to exchange currency at a predetermined rate within a specific timeframe, offering flexibility while still providing some level of protection against unfavorable movements in exchange rates. These strategies help mitigate the financial impact of currency fluctuations on international transactions.

Question 88

Why it is essential for business enterprise to understand their environment?

Answer 88

Understanding the business environment is essential for any enterprise because it directly impacts decision-making and overall success. First, the environment includes various factors such as economic conditions, political stability, and social trends that can create both opportunities and challenges. By analyzing these factors, businesses can identify potential growth areas and adapt their strategies accordingly. Second, being aware of market dynamics helps companies mitigate risks associated with changes in consumer behavior or regulatory requirements.
Additionally, understanding the environment allows businesses to remain competitive by staying ahead of industry trends and technological advancements. Lastly, a thorough grasp of the business environment enables organizations to make informed decisions that align with their goals and resources, ultimately leading to better performance and profitability. In summary, navigating the business environment effectively is crucial for long-term success and sustainability in today’s dynamic marketplace.

Question 89

Why can international trade not be expected to be an engine of growth for today’s developing nations? Answer me in simple terms in paragraph with atleast 5 sentences

Answer 89

International trade may not serve as an effective engine of growth for today’s developing nations due to several significant challenges. First, many developing countries often rely on a narrow range of exports, typically raw materials or agricultural products, which makes them vulnerable to price fluctuations in global markets. This dependency can lead to economic instability, as any drop in commodity prices can severely impact their economies. Additionally, these countries frequently face high tariffs and trade barriers imposed by developed nations, which limit their access to lucrative markets and hinder their ability to compete effectively.
Moreover, the rapid changes in the global trade landscape—such as rising geopolitical tensions and technological advancements—can create uncertainties that disproportionately affect developing nations. They often lack the infrastructure and capacity to adapt quickly to these changes, which can further marginalize them in the global economy. Finally, while international trade has the potential to reduce poverty and stimulate growth, it requires adequate support systems, such as investment in local industries and skills development, which many developing countries currently lack. Without addressing these fundamental issues, the promise of international trade as a growth engine remains unfulfilled for many developing nations.

Question 90

What are some of the problems created by multi- national corporations in the home country? in the host country? Answer me in simple terms in paragraph with atleast 5 sentences

Answer 90

Multinational corporations (MNCs) can create various problems in both their home and host countries. In the home country, one major issue is the loss of jobs as companies may move operations abroad to take advantage of cheaper labor, leading to unemployment in local communities. This can also result in a decline in local industries that struggle to compete with the lower prices of imported goods from the MNCs’ overseas production. Additionally, MNCs may prioritize profits over ethical considerations, leading to practices like tax avoidance, which can reduce government revenue and impact public services.
In the host country, MNCs often exploit local resources and labor, sometimes providing poor working conditions and low wages, which can harm the local workforce. They may also impose their own corporate culture, overshadowing local traditions and values, which can erode cultural diversity. Furthermore, MNCs might engage in practices that manipulate local regulations to their advantage, undermining the host country’s sovereignty and economic stability. Lastly, while they bring investment and jobs, a significant portion of profits is often repatriated back to the home country rather than reinvested locally, limiting the economic benefits for the host nation. Overall, while MNCs can contribute positively to economies, they also pose serious challenges that need careful management.

Question 91

Explain why nations impose trade restrictions if free trade is the best policy. Answer me in simple terms in paragraph with atleast 5 sentences

Answer 91

Nations impose trade restrictions even though free trade is often considered the best policy for several reasons. First, protectionism helps shield domestic industries from foreign competition, which can be particularly important for emerging or struggling sectors that might not yet be able to compete effectively on a global scale. This is often justified by the need to protect local jobs and maintain economic stability, as increased competition from abroad can lead to job losses and business closures.
Second, trade restrictions can be used to safeguard national security interests by limiting imports of certain goods that could be critical in times of crisis or conflict. Additionally, governments may impose tariffs or quotas to address trade imbalances and ensure that local producers have a fair chance in the market, especially when foreign goods are perceived as being sold at unfairly low prices due to subsidies or lower labor costs abroad. Lastly, some restrictions aim to protect consumers by ensuring that imported products meet local safety and quality standards, which can inadvertently create barriers to free trade. Overall, while free trade promotes efficiency and lower prices, trade restrictions are often seen as necessary measures to protect domestic interests and maintain economic balance.

Question 92

includes a nation’s net trade in goods and services, its net earnings on cross border investments, and its net transfer payments.

Answer 92

Current Account

Question 93

What are the advantages (2) and disadvantages of international trade agreements (2)?
Explain your answer

Answer 93

International trade agreements come with both advantages and disadvantages that can significantly impact the economies of the participating countries.

Advantages:
Economic Growth: Trade agreements typically reduce tariffs and other barriers, allowing countries to access larger markets. This can lead to increased trade, economic growth, and job creation as businesses expand their operations and reach new customers.
Consumer Benefits: These agreements provide consumers with a wider variety of goods at lower prices, as competition increases among producers from different countries. This access to diverse products can enhance consumer choice and improve living standards.

Disadvantages:
Job Losses in Vulnerable Industries: While trade agreements can create jobs overall, they may also lead to job losses in sectors that cannot compete with cheaper imports. Local businesses might struggle to survive against foreign competitors, resulting in unemployment in those industries.
Economic Dependence: Countries may become overly reliant on trade partners, which can be risky if those partners face economic downturns or political instability. This dependence can make domestic economies vulnerable to external shocks, undermining long-term stability.

Overall, while international trade agreements can foster growth and provide consumer benefits, they also pose challenges that need careful management to protect local industries and maintain economic resilience.

Question 94

Are relative and are expressed as a comparison of the currencies of two countries

Answer 94

Exchange Rates