Trade and Globalisation - L3 Balance of Trade Flashcards
Identify 5 of Australia’s most imported goods and services in the 2021/22 financial year.
Refined petroleum, passenger motor vehicles, freight, telecom equipment and parts, goods vehicles, computers, professional services, pharmacy products, medications, crude petroleum
Identify 5 of Australia’s most exported goods and services in the 2021/22 financial year.
Iron ore, coal, natural gas, gold, education-related travel services, crude petroleum, wheat, aluminum ore, beef, copper ore
What is the formula for Aggregate Demand?
AD = C + I + G + (X – M)
C = Private Consumption Expenditure
I = Private Investment Expenditure
G = Government Expenditure
X = Exports
M = Imports
International trade can lead to an increase in aggregate demand in the Australian economy by …
providing overseas buyers with the opportunity to consume Australian produced goods and services (exports), thereby increasing levels of expenditure on goods and services produced in the Australian economy over a given period of time.
Businesses that produce goods and services to sell to overseas buyers will need to employ more labour to meet demand. If more people are employed, there will be more consumers with disposable income to purchase goods and services (C), increasing aggregate demand.
What is the balance of trade?
The Balance of Trade (BOT) isthe difference between the value of a country’s exports and the value of a country’s imports for a given period.
A Trade Deficit means that the value of our Exports < Imports
A Trade Surplus means that the value of our Exports > Imports
Why are the vast majority of manufactured products consumed by Australians produced overseas and imported?
This is due to cheaper costs of production in other countries. Labour in particular, is very expensive in Australia compared to some other countries.
For example, many people elect to buy electrical items manufactured in China. Lower labour costs and lower set up costs (e.g. factory and equipment) make manufacturing there more cost effective.
How does trade impact unemployment in the Australian economy?
The bigger the trade surplus, the more positive it is for economic activity and jobs creation.
How does trade impact inflation in the Australian economy?
Growth and jobs creation can create demand inflationary pressures in the economy.
How does trade impact living standards in the Australian economy?
When more people are employed, house-holds have greater levels of disposable income and subsequently access to goods and services, improving living standards.
