Unit 3 Chapter 1

Question 0

Trade liberalisation

Answer 0

The process of reducing barriers to trade so that economies can move gradually closer to free trade, which would mean that there are no trade barriers at all.

Question 1

Tariffs

Answer 1

Taxes on imported goods. They make the price higher and sales will be generally lower.

Question 2

Trade blocs

Answer 2

Groups of countries where barriers to trade are reduced or eliminated between member states

Question 3

Market saturation

Answer 3

When it becomes impossible to expand sales further in that particular market. If the product is a durable good e.g. a washing machine, it may still be possible to sell replacement machines.

Question 4

The product life cycle

Answer 4

The phases which many products go through between their first production to the market and the eventual decline in sales that may lead to production ceasing. These phases include development, introduction to the market, growth, maturity (during which sales are fairly constant) and decline.

Question 5

An extension strategy

Answer 5

They are aimed at extending the life of a product either by making small changes in it, finding new uses for it, or finding new markets.

Question 6

Emerging economies

Answer 6

Characterised by rapid economic growth. They have seen big increases in manufacturing output and standards of living are rising. Some would still be described as poor countries (India) but others (Mexico) are well on the way to becoming developed countries, with modern economies. The group includes many smaller countries like Chile and Thailand.

Question 7

Offshoring

Answer 7

Locating production in a foreign country. The objective is to exploit cost savings, most often lower wage rates.

Question 8

IMF (international monetary fund)

Answer 8

Coordinates the international monetary system. It tries to keep the system stable, and provide adequate finance for world trade to continue without interruption.

Question 9

The World Bank

Answer 9

They lend to their developing countries in order to fund projects which will help them to raise incomes and make their economies more efficient.

Question 10

WTO (World Trade Organisation)

Answer 10

Started out as GATT (the General Agreement on Tariffs and Trade). It supervises world trading arrangements and trade negotiations and helps to resolve disputes between governments.

Question 11

Free trade areas

Answer 11

Groups of countries that trade completely freely with eachother, with no trade barriers, but each member country retains its own independent trade policies in relation to the rest of the world.

Question 12

Common markets

Answer 12

They have completely free trade internally and a single unifies trade policy covering all member countries trade with the rest of the world. Besides free movement of goods and services, there is also free movement of people and capital. Individuals in all member countries can work in any other member country. Business based within the common market can invest in any member country.

Question 13

Trade creation

Answer 13

When there is an increase in the total amount of goods and services traded because of reduced trade restrictions within a trading bloc.

Question 14

Trade diversion

Answer 14

When a trading bloc reduces imports from non member countries, enabling businesses within member countries to increase sales inside the trading bloc.

Question 15

FDI (Foreign Direct Investment)

Answer 15

When businesses or governments invest in other countries. They may build factories or offices, develop mines or create their own marketing and distribution services. There is a good deal of FDI between the UK and the USA but increasingly, emerging economies are both receiving and extending their own FDI.

Question 16

Developed countries

Answer 16

Most of Europe, Japan, the USA, Canada and Australia. All have high incomes. Through capital investment, they have acquired sophisticated production facilities. Some countries that were until recently placed in the developing country category are now considered to be developed. These include Singapore and South Korea. Others are not far behind them.

Question 17

Developing countries

Answer 17

They have relatively low standards of living, compared to the developed countries. They may have small manufacturing sectors and the majority of the population engaged in agriculture. They have limited infrastructure and levels of investment are often low. Many of the worst off have been damaged by wars.

Question 18

BRIC

Answer 18

(Brazil Russia India and China). These are the worlds four largest fast-growing economies. The term is sometimes used to refer to all fast-growing economies. South Africa thinks of itself as the fifth! All are often described as emerging economies.

Question 19

Backward innovation

Answer 19

Involves developing low cost products that will appeal to people with relatively low incomes. Frequently they will have the most basic functions of sophisticated manufactured products, and may be similar to early versions of products that are now sold with many more features in developed economies.

Question 20

Backward innovation

Answer 20

Involves developing low cost products that will appeal to people with relatively low incomes. Frequently they will have the most basic functions of sophisticated manufactured products, and may be similar to early versions of products that are now sold with many more features in developed economies.