Unit 3

Question 1

Trade

Answer 1

Importing goods from one country to another

Question 2

Free trade

Answer 2

Trade without barriers such as tariffs

Question 3

Advantages of trade

Answer 3

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

Question 4

Disadvantages of trade

Answer 4

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

Question 5

Barriers of trade

Answer 5

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

Question 6

Reasons for trade barriers

Answer 6

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

Question 7

Why does the UK trade so much with the EU and the USA

Answer 7

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

Question 8

UK main exports

Answer 8

Petroleum oils
Cars
Alcohol
Banking
Medicaments

Question 9

Current account

Answer 9

Is the U.K.’s largest trade in deficit

Question 10

Investment income

Answer 10

Measure of the return that investors get from their assets

Question 11

Current transfers

Answer 11

The money that the government give an aid or payments to and from international organisations such as the EU

Question 12

Trade deficit

Answer 12

When the uk imports more than exports

Question 13

Trade surplus

Answer 13

When the uk exports more than imports

Question 14

Exchange rate

Answer 14

The price of one currency in terms of another

Question 15

Appreciation

Answer 15

Strengthening of the exchange rate which means 1 pound buys more foreign currency

Question 16

Consequences of appreciation

Answer 16

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

Question 17

Depreciation

Answer 17

We can aim of the exchange rate means 1 pound and buy less with a foreign

Question 18

Consequences of depreciation

Answer 18

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

Question 19

Determinants of demand for currency

Answer 19

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

Question 20

Determinants of supply for a currency

Answer 20

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

Question 21

Impact of changes in exchange rates on individuals and firms

Answer 21

Individuals
Cheaper to import goods from abroad
G Portugal abroad on holiday

Firms
Demand for exports wilful
For the cost of production

Question 22

European Union

Answer 22

Collection of 28 European countries

Question 23

Single market

Answer 23

No barriers to trade between EU countries

Question 24

Freedom of movement

Answer 24

Labour is free to move around the EU to find work

Question 25

Advantages and disadvantages of the UK being part of the EU

Answer 25

``` 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 ```

Question 26

Eurozone

Answer 26

Collection of 19 countries who use the USA currency

Question 27

Advantages and disadvantages of the | Eurozone

Answer 27

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

Question 28

Developing countries

Answer 28

Countries which are less developed and newly industrialised

Question 29

Newly industrialised countries

Answer 29

Brazil Russia India China Mexico Indonesia Nigeria Turkey

Question 30

Characteristics of less-developed economies

Answer 30

``` High rates of unemployment Poorly educated labour Lack of capital investments Poor infrastructure e.g. roads Political instability Lack of foreign investments ```

Question 31

Strategies to increase economic growth

Answer 31

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

Question 32

Multinationals

Answer 32

Enterprise or corporation that operates in many different countries

Question 33

Why do you multinationals invest in developing countries

Answer 33

Cheap labour costs Cheaper land Large population market Closer to raw materials

Question 34

Disadvantages of multinationals locating in developing

Answer 34

Bankrupt local goods and services Erosion of natural resources Pollutions Top jobs don’t go to locals

Question 35

Emerging economies

Answer 35

Faster growing and developing countries

Question 36

Characteristics of emerging economies

Answer 36

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

Question 37

Risks of UK firms investing in emerging economies

Answer 37

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