Transcript What questions would you like to ask?

What questions would you like to ask?
• From which country does the UK import the most services? (1)
Germany
• To which country does the UK export the most services? (1) Ireland
• What is meant by an export? (2)
• Goods or services that UK firms provide and sell to people and firms
not resident in the UK. They result in money coming in to the UK
• What is meant by an import? (2)
• Goods or services that UK people or firms buy from foreign firms
They result in money leaving the UK
• Explain what is meant by a trade surplus (2)
• Where the value of exports exceeds the value of imports
• Which countries are part of the EU? Which use the Euro?
• EU – Ireland, Germany, Netherlands, France, Sweden
• Euro – Ireland, Germany, Netherlands, France
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Use figure 1.) to calculate the UK’s Invisible Trade Balance with Germany (2)
5.5-3.8 = £1.7bn surplus
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Explain what is mean by specialisation? (2)
This is where a firm or country focuses on producing a narrower range of goods or
services. In this case the UK specialises in services as it is more efficient at producing
these
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Explain what is meant by absolute advantage?(2)
Two marks for a statement such as: “Absolute advantage is where a country has some
benefit/advantage over other countries in the production of a product.”
OR
Two marks for a statement identifying the benefit/advantage with further development
such as:
“Absolute advantage is when a country produces a good/service with fewer resources
and at a lower cost”.
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Explain how the UK economy benefits from specialisation in this context (4)
By specialising in goods and services in which it has an absolute advantage. This means
it can produce services such as…..with fewer resources and at a lower cost. It can then
sell these overseas leading to more exports and higher levels of GDP as a result. It can
then buy other goods from other countries who can produce products at a lower cost
than in the UK. This enables goods and services to be purchased at lower prices and
helps keep inflation low. Therefore living standards are higher .
• Are there any disadvantages of trade
specialisation to the UK?
• Danger of overspecialisation. Vulnerable if
demand for goods and services we specialise
in falls.
• UK currently runs a current account deficit
due to the value of imports of manufactured
goods
What questions would you like to ask?
• Current Account –
• the balance of trade in goods and services plus net
investment income from overseas assets
• Surplus –
• where the value of exports exceeds the value of imports
• Deficit –
• where the value of imports exceeds the value of exports
• Balance of Trade in Services –
• the difference between the value of exports of tertiary
sector services and the value of imports of tertiary sector
services
• Calculate the Balance of Trade in Services in 2011
• (2) £97311m - £43564M = £53747m surplus
• Which service earns the UK most export revenue
• (1) Professional etc services
• Which service does the UK import most of (1)
• Professional etc services
• Using fig 2 and 3 For which service does the UK
have the biggest trade surplus (2)
• Professional etc Services of £15620m
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The evidence says the UK has an overall deficit on the current account of the
balance of payments
Explain two reasons why the UK might have a current account deficit (6)
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Possible Reasons – you need to PBT
Loss of advantage in many industries
Globalisation
Growth in peoples real incomes
Exchange Rate
Low levels of productivity and investment
Relatively weak product innovation
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Globalisation – because it is cheaper to produce goods where costs are low eg
labour costs. Therefore we are now importing more manufactured goods from
countries like China. This rise in imports has increased the current account
deficit
Low levels of productivity – disappointing productivity has meant the average
cost of producing products is higher than in other countries. Therefore our
products are less competitive leading to more imports and less exports.
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• Other than quotas and tariffs state two
possible solutions which a government might
adopt in order to improve a deficit on the
current account of the balance of payments
(2)
Discuss which of the solutions you identified above may be
better for improving a deficit on the current account of the
balance of payments. (8)
What questions would you like to ask?
• What is meant by the term free trade? (2
marks)
• What is meant by the term globalisation (2
marks)
• Explain two reasons why countries trade with
one another (4 marks)
State and explain two benefits to UK
consumers arising from free trade (4
marks)
• Explain the following problems of increased
world trade and how they may affect the UK
(6 marks)
• Increased Negative Externalities –
• Global Interdependence –
• Possible increased income inequality -
• Increased Negative Externalities –
• higher pollution, CO2 emissions etc. These may result from
producing and transporting more goods.
• Global Interdependence –
• Makes the UK more vulnerable to external shocks. For example
slow growth and recessions in the Euro Zone countries are currently
impacting on the UK as these nations buy our exports
• Possible Increased Income Inequality –
• Often the benefits of trade are not shared out equally. Developed
countries tend to benefit more from trade than some developing
countries. Also within countries the benefits may not be shared out
equally. Entrepreneurs and business people may see more of the
benefits than the workers. Particularly in developing countries
where wages are often low. Trade may also lead to income
inequality if people are made unemployed due to foreign
competition.
• Be careful :
• If it says UK – link explicitly to UK
• If it says economy – link to big economic indicators (Inflation,
Unemployment, Economic Growth, Balance of Payments)
What questions would you like to ask?
• Explain how the change in forecasted growth may affect
the UK Economy (4 marks)
• If trade growth slows there may be a fall in demand for UK
exports. This may lead to lower economic growth in the UK
and even a possible rise in unemployment. UK may be hard
hit as over 50% of our trade is with Europe where demand
is weakest. China is not currently one of our biggest export
markets
BUT
• This is only a forecast
• Trade is still forecast to grow so the impact may be limited.
Trade is not forecasted to fall.
• UK exports are only 32% of GDP so may not be that
significant
• Protectionism – where an action is taken
that reduces international trade
• Protectionist Methods
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Tariffs – A tariff is a tax imposed on a good or service from another country to raise its
price and reduce the quantity demanded. This makes foreign imports more expensive
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A Subsidy – Is a payment made by the government to producers of a good or service
so as to increase quantity or reduce price. It gives domestic businesses advantages
over foreign producers.
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A Quota – This is a physical limit on the number of goods of a certain type that are
allowed into a country. It can be in the form of a stated number or a percentage of
the total market
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An Embargo – This is a ban on the import of a good or service
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Regulations – Many countries try to limit imports through a variety of rules. You may
have noticed that Volvo cars (from Sweden) always have their lights on. This is
because the law in Sweden demands this. All cars exported to Sweden have to change
their wiring so that they obey this law, thus increasing costs
To what extent will the growth of China benefit the UK through
international trade (12 marks – June 2011)
The benefits of protectionist policies outweigh the
costs – do you agree with this statement justify your
answer (10 marks)