macro - international trade Flashcards
what is international trade?
the exchange involved in buying and selling goods between countries
what are imports?
the purchase of goods and services from abroad leading to an outflow of currency from the UK.
what are exports?
the sale of goods and services to buyers from other countries leading to an inflow of currency to the UK.
what does international trade influence?
output
employment
price level
what are the advantages of international trade?
allows countries to specialise (produce what the country is best at) - use scarce resources more efficiently - reduced costs - global output increased - increase in living standards
consumer benefit - increased competition - more produced at a higher quality - lower price and more choice - increase in living standards
firms benefit - firms will have a larger market to sell in - allows economies of scale and specialisation - can introduce firms and countries to new ideas and skills
what are the disadvantages of international trade?
more competition from specialisation - contraction or expansion of UK industries - is our labour force flexible enough to cope?
occupational immobility of labour - possible unemployment in certain industries (structural unemployment).
specialisation can lead over-reliance on one industry.
international trade usually involves higher transport costs
currency exchanges can carry costs
increases globalisation
what is the theory of international trade?
it allows for specialisation which increases efficiency - increasing economic welfare
how is specialisation possible?
different factor endowments (resources a country already has e.g. fertile land) means that some countries can produce goods and services more effiecently than others
what is absolute advantage?
where one country is able to provide more of a good or service with the same amount of resources than another so the unit cost is lower.
