Unit 3

Question 1

Current account

Answer 1

the balance of trade in goods and services plus net investment incomes from overseas assets

Question 2

Balance of trade in goods

Answer 2

the export of goods from the primary and secondary sectors minus the import of these goods

Question 3

Balance of trade in services

Answer 3

the exports of tertiary sector services minus the import of these services

Question 4

Current account deficit

Answer 4

the value of imports exceeds the value of exports

Question 5

Current account surplus

Answer 5

the value of exports exceeds the value of imports

Question 6

Exchange rate

Answer 6

how much of one currency needs to be given up to buy one unit of another currency

Question 7

Floating exchange rate

Answer 7

where the prices of two currencies are decided by market forces

Question 8

Fixed exchange rate

Answer 8

where the central bank of a country tries to decide on the price of a currency

Question 9

International competitiveness

Answer 9

the ability of companies to compete with companies from other countries

Question 10

Competitiveness

Answer 10

the ability of a country to compete successfully internationally and maintain improvements in real output and wealth

Question 11

Globalisation

Answer 11

an expansion in trade of goods and services leading to greater international interdependence

Question 12

Multinational companies

Answer 12

a company that has operations all over the world

Question 13

Specialisation

Answer 13

being better than another country at providing a good or service, in terms of the quantity of output and lower cost

Question 14

Absolute advantage

Answer 14

when a country is able to provide a good or service using fewer resources and at a lower cost than another country

Question 15

International trade

Answer 15

the exchange of goods and services across international boundaries

Question 16

Free trade

Answer 16

an absence of tariffs, quotas and regulations to reduce or prevent trade among nations

Question 17

Protection

Answer 17

where an action is taken that reduces international trade

Question 18

Tariff

Answer 18

a tax placed on imports to increase the price and reduce the quantity demanded

Question 19

Single market

Answer 19

the economies of different countries can be treated as one when a firm is considering its domestic market

Question 20

Customs union

Answer 20

a group of countries, such as the EU, have free trade between members, but a common external barrier

Question 21

Single currency

Answer 21

a group of countries agree to adopt the same currency and to have one monetary policy

Question 22

Foreign direct investment

Answer 22

the investment by foreign companies in the production of goods and services in another country

Question 23

Absolute poverty

Answer 23

on a world basis is defined as having less than $1.25 a day to live on