Unit 3 Flashcards
Trade
Importing goods from one country to another
Free trade
Trade without barriers such as tariffs
Advantages of trade
Variety of goods and services
Freetrade allows cheaper importing and exporting
Improve standards of living
Provide competition making sure firms are more efficient
Better use of resources
Firms need to produce the same quality as competing firms
Disadvantages of trade
Unemployment due to greater competition
Greater value of imports which is a leakage so national income falls
Dumping - Providing large amounts of products actually price
Local businesses cannot compete with multinationals
Barriers of trade
Tariffs – tax on imports – foreign firms to supply less at higher price
Quarta - limit on the amount of goods in a county
Embargo - ban on imports from another country
Reasons for trade barriers
To protect their own domestic industry for a foreign competition
To balance imports and exports
So local industries don’t go bankrupt
Preserve health and safety in the country
Why does the UK trade so much with the EU and the USA
EU is close to the UK so transport cost of exporting goods are low
Countries in the EU have free trade
Consumers in the EU and USA demand the goods from the UK
USA and UK have shared culture, so long history of trade
UK main exports
Petroleum oils Cars Alcohol Banking Medicaments
Current account
Is the U.K.’s largest trade in deficit
Investment income
Measure of the return that investors get from their assets
Current transfers
The money that the government give an aid or payments to and from international organisations such as the EU
Trade deficit
When the uk imports more than exports
Trade surplus
When the uk exports more than imports
Exchange rate
The price of one currency in terms of another
Appreciation
Strengthening of the exchange rate which means 1 pound buys more foreign currency
Consequences of appreciation
Goods in other countries are cheaper therefore it is cheaper to import from abroad
UK goods are dearer for foreign countries therefore less demand for UK exports
Depreciation
We can aim of the exchange rate means 1 pound and buy less with a foreign
Consequences of depreciation
Goods in other countries are no do you are UK citizens will be able to buy less goods from abroad imports full
UK exports are no cheaper greater demand for exports
Determinants of demand for currency
Fall in exports cause demand for UK pounds full
Tourism increases then demand for pound increase
Investors put large sums of money in banks with high interest rates this increases demand for a pound
Low inflation rate cause investors to hold there’s assets as they get more real return
Increase in pound means firms get higher profit
Determinants of supply for a currency
UK citizens buy products from foreign countries, they sell UK pound on foreign exchange markets
UK citizens go on holiday they exchange the pound for foreign currency
High inflation increases the supply of the UK pound
Impact of changes in exchange rates on individuals and firms
Individuals
Cheaper to import goods from abroad
G Portugal abroad on holiday
Firms
Demand for exports wilful
For the cost of production
European Union
Collection of 28 European countries
Single market
No barriers to trade between EU countries
Freedom of movement
Labour is free to move around the EU to find work
Advantages and disadvantages of the UK being part of the EU
Advantages And restricted movement of goods and services and labour among countries Greater choice for consumers More competition encourages efficiency Increasing standards Big market to increase volume of trade Employment opportunities
Disadvantages Competition for UK firms Lower wage economies Migration issues Contributions EU budget Eurozone crisis
Eurozone
Collection of 19 countries who use the USA currency
Advantages and disadvantages of the
Eurozone
Advantages
Stable exchange rates reduce risks of trade and increases volume of trade
No transaction costs lead to more investments
Disadvantages
UK no longer determines its interest rates
High menu costs e.g. vending machines
Developing countries
Countries which are less developed and newly industrialised
Newly industrialised countries
Brazil
Russia
India
China
Mexico
Indonesia
Nigeria
Turkey
Characteristics of less-developed economies
High rates of unemployment Poorly educated labour Lack of capital investments Poor infrastructure e.g. roads Political instability Lack of foreign investments
Strategies to increase economic growth
Third aid – providing food for underdeveloped countries this because food prices to full and local farmers incomes to full
Educational support e.g. improve quality of education and training of teachers
Soft loan - loan with low interest rates so countries can use efficiently and get more return
Woman working
Multinationals
Enterprise or corporation that operates in many different countries
Why do you multinationals invest in developing countries
Cheap labour costs
Cheaper land
Large population market
Closer to raw materials
Disadvantages of multinationals locating in developing
Bankrupt local goods and services
Erosion of natural resources
Pollutions
Top jobs don’t go to locals
Emerging economies
Faster growing and developing countries
Characteristics of emerging economies
Mass production of low end products
Invest large sums into education and training improving labour
Value of GDP is higher than developed economies
Afford large investments in large capital project
Risks of UK firms investing in emerging economies
Jobs in UK may be lost
Goods are were made in the UK and are made in emerging countries
Firms abroad will not pay UK corporation tax
