TRADE Flashcards
Four Factors That Influence Patterns of Trade
comparative advantage, emerging economies, trading blocs, exchange rates.
Impact of Comparative Advantage on Pattern of Trade
If a country has a comparative advantage in a good, they will export more of it.
Impact of Emerging Economies on Pattern of Trade
There has been an increase in exports and imports from the emerging economies; Brazil, Russia, India, China and South Africa.
Impact of Trading Blocs on Pattern of Trade
Trading blocs can lead to trade creation and trade diversion.
- Impact of Exchange Rates on Pattern of Trade
An exchange rate appreciation will lead to an increase in imports and a decrease in exports.
3 affect of high export prices
AD shifts left
unemployment
trade defecit
What is the role of the WTO
An organisation that resolves trade disputes and encourages trade liberlisation
What is bilateral trade
Trade between 2 countries or trading blocs
What is the most favoured nation principle
countries cannot discriminate between their trading partners
3 conflicts between WTO and trading blocc
- trade diversion so distorts trade
- negative impact on non member countries
- May lead to protectionist policies between different trading blocs
similarities between WTO and trading blocs (3)
- seek trade liberalisation
- trade creation
- specialisation and division of labour
Why do countries set protectionist measures (3)
- prevent dumping
- preserve jobs
- help infant industries
What are the protectionist measures
- tarrifs
- quotas
- health regulations
- environment regulations
- subsidies
WHat is dumping
Predatory pricing on an international level.Exported goods that are sold below their domestic cost in the exporting country
what are the restrictions of quotas
no tax revenue
shortgaes
How do subsidies restrict trade
they lower price of exports/ domestic price so more consumers buy the domestic good
significance of a trade defecit
- surplus on capital and financial account
- countries invest in our country
- especially bonds
- country in debt to another country
- can affect decisions
causes of a trade deficit / surplus (5)
- inflation
- exchange rate
- growth
- quality
- productivity
Why is lowering interest rates an expenditure switiching policy
Hot money will flow out
supply of £ increases
lowering exchange rate
making imports more expensive so customers will switch
Types of policy to reduce current account defecit (3)
expenditure reducing
expentiture switching
supply side policies
supply side policy example for reducing defecit
reducing corporation tax shift SRAS and LRAS to right lowering price increasing competitiveness
Why is venuluela in hypeinflation
Nearly 3000% in 2020 due to heavy quantitative easing , raising minimum wage in 2014
one industry the us subsidieses ans some facts
farming $19 billion dollar a year in 2014
It paid farmers to make sure supply did not exceed demand. The government subsidized farmers to keep croplands idle in order to prevent overproduction. It also bought excess crops. It then either stored them or gave them away to feed low-income people throughout the world.
Why may the US subsidy to farming be unsucessful
15% was wasteful
