International trade
Define comparative advantage
The ability to produce a product at a lower opportunity cost.
What are tariffs?
Tax on a product imported into a country
What is a floating exchange rate?
where the value of a country’s currency is determined solely by market forces.
What is the current account
a record of transactions in terms of trade in goods, services, and primary and secondary income.
What is Ms Karalius's first name?
Tendai
Define absolute advantage
The ability to produce more of a product than another country that has the same amount of resources can produce
What is an import quota?
Legal limit on the quantity of a product that can be imported into a country.
Describe the demand & supply curve of a currency appreciating
demand shifts outwards while supply remains constant
How do you calculate the current account balance?
Current Account Balance= (Balance of Trade in Goods and Services)+(Net Primary Income)+(Net Secondary Income)
What is the organization that regulates trading
World Trade Organization (WTO)
Define terms of trade
The ratio of a country’s export prices to import prices.
What is an export subsidy?
Money given by the government to an exporter so the price of the product can be reduced to make it more competitive on world markets.
Describe the demand & supply curve of a currency depreciating
the supply curve shifts outwards while the demand curve stays unchanged
What is the primary income?
the income from interest, profits, dividends generated from foreign investment and also i.e. payments from people living and working overseas.
Define what a sunrise industry is:
New or relatively new industries which are rapidly growing and are believed to have the potential to be a market leader in the future.
In Indonesia 50 toys have to be given up to obtain 10 cars (50 : 10 ), while in Botswana 8 toys need to be given up to get 8 cars (8 : 8).
What country has what advantage (comparative or absolute) in what product?
Indonesia: Indonesia had an absolute production advantage in both products and it has a comparative advantage in toys
Botswana: has a comparative advantage in the production of cars
What does embargo mean?
Complete ban on products from a particular country.
Does appreciation or depreciation cause inflation?
appreciation
Which of the following are components of the current account of the balance of payments?
A Trade in goods, trade in services, primary income, secondary income
B Trade in goods, trade in services, trade in investments, financial exchanges
C Trade in goods, capital and financial movements, transfer payments, membership of international organisations
D Trade in goods, primary income, secondary income, exchange rate costs
A
What is hot money?
short-term capital flows in the foreign exchange market due to changes in interest rates.
Assume that between 2019 and 2020 Country A’s index of exports prices fell from 100 to 95 while its index of import prices rose from 100 to 110.
Calculate the terms of trade for Country A in 2020:
(95/110) x 100 = 863.63
Two statements describing forms of protectionism a government can use are listed.
1 There is a total ban on imports.
2 All imported goods have to be of a specified standard.
What type of protectionist policies are these?
1 embargo
2 administrative barrier
What is likely to happen if there is a rise in the international value of a country’s currency?
A a fall in the foreign currency price of its exports
B a fall in the volume of its exports
C a rise in the domestic currency price of its imports
D a rise in the domestic price level
B
What is most likely to cause a current account deficit?
A a recession in the domestic economy
B a relatively high rate of inflation
C an undervalued exchange rate
D high labour productivity
B
Countries X and Y are trade partners. An increase in which economic indicator in country Y is most likely to cause a fall in the exchange rate of country X?
A economic growth
B inflation rate
C money supply
D trade barriers
D