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Flashcards in Unit 8 Deck (32):
1

How does a country have an absolute advantage?

If it is able to produce more of a good or service than other countries

2

How can a country have a comparative advantage?

A country has a comparative advantage in the production of a good or service that it produces at a lower opportunity cost than its trading partners

3

Give two examples of country's with specialised g/s

Saudi Arabia: has the most plentiful oil reserves in the world, and the tech to extract it
Japan: leading producers of cars - new tech have been used to develop efficient manufacturing systems

4

Give an advantage of specialisation

Consumers have access to a greater variety of higher quality products across the world

5

Give a disadvantage of specialisation

A country can be vulnerable if it has to rely on imports to invest in its own domestic energy industries, it will have to import energy from overseas

6

What is an exchange rate?

The rate at which one currency exchanges for others

7

What does SPICED stand for?

Strong
Pound
Imports
Cheap
Exports
Dear

8

What is a fixed exchange rate?

The value of the currency is fixed against another currency or group of currencies - it is maintained by the government

9

What is a floating exchange rate?

Value of the currency fluctuates due to demand and supply

10

What happens when depreciation occurs in terms of demand and supply?

Supply increases
Demand decreases

11

What happens when appreciation occurs in terms of demand and supply?

Supply decreases
Demand increases

12

What happens to the exports when appreciation happens?

Exports decrease because they are too expensive for other countries to buy
Profits decrease, trade deficit will get worse because imports increase, jobs decrease, NME

13

What happens to imports when appreciation occurs?

Imports increase from other countries as they are cheaper abroad

14

Give 3 examples of firms that want a strong pound

BP
Currys PC world
Thompson's

15

Give 3 examples of firms that want a weak pound

BBC
Pfiza
Local farmers

16

Why would lloyds back want a low pound?

So they can sell more insurance to other countries

17

What is appreciation?

If the pound buys more of a currency it has appreciated its value

18

What is depreciation?

If the pound buys less of a currency it has depreciated its value

19

What happens to inelastic goods in appreciation and depreciation?

Some of our imports are relatively inelastic so therefor when our exchange rate gets stronger there will be very little effect on the volume of imports for these goods

20

What are import tariffs?

Taxes on types of imports e.g. Taxes on cars imported from Japan

21

What are import quotas?

Quotas set a physical limit on the number of imports e.g. American cars - hummers

22

What is administrative complexity?

The government may require importers to fill in time consuming paperwork e.g. Ivory Coast coco doesn't get imported to the UK

23

What is import licensing?

Governments can grant licences for the import of certain goods -> not granting a license is a type of protection e.g. McDonalds made under license in UK

24

What are subsidies?

Payments to a domestic producer e.g. Farming fruit so can compete with other imports

25

What is exchange rate manipulation?

The G can buy or sell its own currency in order to alter the exchange rate

26

What is exchange rate control?

governments preventing or limiting the amount of foreign exchange to which importers have access

27

What are embargos?

A complete ban on the import of certain goods e.g. Afghanistani flick knives

28

What is free trade?

Free trade between member countries I.e. No tariffs, quotas or regulations

29

What is the WTO?

- formed after WW2 at a work conference designed to ensure peace
- to pursue open boarders - free trade
- the main activities are negotiating a reduction or elimination of import tariffs and other barriers to trade, and agreeing rules on the conduct of trade e.g. Rules regulating to dumping of waste

30

What are the benefits of free trade?

- trading makes everybody wealthier because they can sell into bigger markets -> increase in jobs -> PME -> economic growth
- free trade enhances the spread of new ideas, new lifestyles and new products
- free trade enhances consumer to buy better quality imports from other countries
- free trade enables people to sell their products to those who are willing to pay the highest price for them. Means that the producer is able to capture a larger proportion of the value of the product

31

What are reasons for protection?

- to help a new industry grow
- to protect small industries that are important to an economy
- to protect the current account of the BOP
- to protect strategic industries

32

What happens to exports when depreciation happens?

Exports increase because exports are cheaper as our exports are more competitive globally -> increase in profit for firms -> jobs increase -> PME -> trade deficit improves