trade

Question 1

Preferential Trade Agreement PTA

Answer 1

lower but not eliminated barriers with trade members

Question 2

Preferential Trade Agreement example

Answer 2

between EU and less developed countries

Question 3

Free Trade Area FTA

Answer 3

a group of countries agree to 0 import tariffs and remove non trade barriers
they maintain external independent barriers

Question 4

FTA example

Answer 4

NAFTA (USMCA)

Question 5

problem of trade deflection

Answer 5

when a member of an FTA buys a good from a non-member and attempts to sell it within the FTA so the country collects no tariff revenue

Question 6

rule of origin

Answer 6

traded goods must be locally sourced components

Question 7

Customs Union

Answer 7

eliminate internal barriers and adopt common external tariffs (CETs)

Question 8

Customs Union example

Answer 8

Mercosur

Question 9

Single Market / Common Market

Answer 9

built around the 4 freedoms of goods, services, labour and financial capital
freedom of movement among members, common external tariffs

Question 10

Single Market / Common Market example

Answer 10

EU
27 members
GDP 13t euros

Question 11

Monetary Union

Answer 11

Common currency, 1 monetary policy interest rate, single central bank (1 banking union possible)
Free movement of resources, CETs, uniform set of economic policies

Question 12

Monetary Union example

Answer 12

Eurozone
20 members

Question 13

trade creation

Answer 13

consumption shifts from a high to low cost producer eg: from a non trade partner to a customs union

Question 14

trade diversion

Answer 14

consumption shifts from a low to high cost producer

Question 15

trade bloc

Answer 15

group of countries that come together and form agreements to promote trade and economic cooperation among themselves

Question 16

economic integration levels in increasing order of closeness

Answer 16

1. PTA
2. FTA
3. CU
4. CM/SM
5. MU

Question 17

economic integration

Answer 17

countries coordinate to reduce trade barriers and harmonise monetary/fiscal policy

Question 18

bi-lateral trade agreement example

Answer 18

Australia-China FTA

Question 19

gravity theory

Answer 19

countries tend to trade most with other nations in closest proximity

Question 20

UK + EU % of imports + exports

Answer 20

46% uk exports go to EU
53% uk imports come from EU

Question 21

UK + China imports + exports

Answer 21

13% uk imports from China
3.6% uk exports go to China

Question 22

UK largest single export market

Answer 22

USA

Question 23

intra-industry trade

Answer 23

trade in similar products between developed countries to exploit economies of scale

Question 24

inter-industry trade

Answer 24

trade between developed and developing countries

Question 25

Amartya Sen beliefs on development

Answer 25

inclusive development is about improving peoples freedom and capabilities

Question 26

PPP exchange rate

Answer 26

Price of good in country A / Price of good in country B

Question 27

market ER £1=$5 PPP ER £1=$3

Answer 27

£ is overvalued $ is undervalued

Question 28

dutch disease

Answer 28

the impact of a sudden discovery of natural resources leading to appreciation which worsens export competitiveness came from discovery of natural gas in the north sea in 1959

Question 29

prebisch singer hypothesis

Answer 29

the prices of primary goods is relative to manufactured goods so falls over time making PPD countries have worsened ToT

Question 30

challenege to prebisch singer hypothesis

Answer 30

many export dependent countries have seen prices rise due to population and income increase increasing demand

Question 31

harrod-domar model

Answer 31

Rate of growth of GDP = Savings ratio / capital output ratio

Question 32

special economic zone (SEZ)

Answer 32

and area in which business and trade laws are different from the rest of the country

Question 33

dualistic economy

Answer 33

an economy with an industrial sector and agricultural sector

Question 34

arthur lewis model

Answer 34

in a dualistic developing economy, economic growth can be achieved by transfering fabour from the agricultural sector to the industrial sector (until the lewis turning point where shortages of agricultural labour)

Question 35

eurozone limiting fiscal policy

Answer 35

Budget deficit < 3% of GDP National debt < 60% of GDP

Question 36

vertical diversification

Answer 36

government offers subsidies for processing investment for value add