Gains from Trade
What is one benefit of international trade for consumers?
Lower prices, increased choice
What is a tariff?
A tax on imports
What organization promotes global free trade rules?
WTO
What happens to exports when a currency depreciates?
Become cheaper abroad (accept increased sales)
What is sustainable development?
Meeting needs without harming future generations
Which theory explains why countries specialize based on lower opportunity cost?
Comparative advantage
Which protection method limits quantity rather than raising price directly?
Quota
What is a free trade area?
Countries remove tariffs between members
What happens to imports when a currency appreciates?
Become cheaper
Name two indicators used to measure development besides GDP.
HDI, life expectancy, education, GII, HPI, OECD Better Life, etc...
Name two benefits firms gain from access to larger international markets.
Economies of scale, higher revenue, larger customer base, allocative efficiency, ...
Give one non-financial barrier to trade.
Regulations, safety standards, paperwork
Name one advantage of trading blocs for firms.
Larger markets, economies of scale, potential access to cheaper inputs
Name one factor that increases demand for a currency.
Exports, FDI, high interest rates, speculation
Explain one barrier to development.
Poor infrastructure, corruption, poverty trap/cycle, difficult geography, resource trap (wealth), instability/war, poor healthcare...
If world price is lower than domestic price, does a country import or export?
Import
Name one disadvantage of trade protection for consumers.
Higher prices, less choice
What is trade diversion?
Buying from inefficient bloc members instead of cheaper outsiders
How could depreciation affect inflation?
Imports (especially of important inputs) more expensive -> inflation rises
Explain one benefit of investing in education.
Higher productivity, incomes, growth, lower birthrate (advantage to an extent), better health...
Explain two reasons why free trade can increase efficiency but worsen inequality in a country.
-Comparative advantage -> higher total output
- Some industries expand, others contract
- Workers in declining sectors lose jobs
Name one winner and two losers of imposing an import quota
Winners:
- Domestic producers
Losers:
- Consumers
- Foreign exporters
- Government (neutral - no revenue)
Explain one political or economic disadvantage of joining a trading bloc.
Loss of sovereignty, harm to non-members, potential for trade diversion, loss of jobs in previously protected industries...
Explain one impact of exchange rate changes on economic growth.
Cheaper exports boost AD and growth (vice versa)
Evaluate one limitation of foreign aid.
Dependency, corruption, misallocation