Economics Unit 2 AOS3 International Trade

what do exports do for Australia money wise

bring money into the Australia because goods and services are being sold, which makes money

what do imports do for Australia money wise

take money out of Australia because goods and services are being brought into the country which costs money

how does exports and imports affect the balance of trade

-when exports are greater than imports the balance of trade is in a surplus, which means more money is entering the country

-when imports are greater than imports the balance of trade is in a deficit meaning more money is leaving the country than coming in.

what is trade

buying and selling of goods and services, which happens between individuals, companies and countries

what is trade liberalisation

Process of reducing and eliminating barriers to international trade such as tariffs, quota and subsides to promote free trade

What are quotas?

Controls and limits the amount of imports entering the country. It ensures local producers are guaranteed a larger share of the market

What are tariffs?

A tax imposed on the government on imported goods

what are subsides?

a sum of money granted by the state or government to help an industry or business keep the price of a good/service or service low.

what is protectionism

government policy of restricting imports to protect domestic industries from foreign competition

Reasons for protectionism

-protecting domestic employment

-supporting are industries

-Generating Government revenue

Reasons against protectionism

-higher prices

-reduced choice/variety of goods available

-increased costs for manufactures

-decreased competition

impact of protectionism on inflation

Protectionism can increase inflation by raising the cost of imported goods through tariffs and quotas, which forces consumers to pay higher prices

impact of protectionism on unemployment

unemployment can decrease because protectionism introduces tariffs, quotas which causes prices to go down which then requires more demand for workers

How do tariffs impact inflation, unemployment, living standards and a country economic growth.

Inflation- tariffs can increase inflation in the short term by raising the price of imported goods.

Economic growth- tariffs can lead to slower growth by increasing costs and reducing production

Living Standards- lower living standards by increasing costs. This makes products less affordable, meaning people have less money to spend.

Unemployment- increase unemployment due to increase in costs for consumers and reduction in production

How do Quotas impact inflation, unemployment, living standards and a country economic growth.

Inflation- Restricts the supply of imported goods which makes them more expensive, increases cost for customer. (inflation ⬆️)

Economic Growth- provides short term benefits to companies by limiting competition which can boost profits and employment. may lead to higher prices due to limited supply

Living Standards- lowers living standards for consumers by increasing prices and reducing quality of goods

Unemployment- Initially will protect domestic jobs as demand increases, but will later result increased costs for production, resulting in increased unemployment

How do Subsides impact inflation, unemployment, living standards and a country economic growth.

inflation- temporary lower and increase inflation. it lowers by reducing customer prices but increases due to gov spending and increased demand for goods

Economic Growth- promote growth by supporting industries and encouraging spending. It can be costly to tax payers

Living Standards- improve living standards by lowering the price for goods, but can cause higher taxes

Unemployment- Reduce job loss as it promotes production and can create jobs

what happens if the current account is in a deficit

more money is leaving the country than entering

what happens if the current account is in a surplus

more money enters than leaves the country

What is include in there 4 sums:

Balance of merchandise trade

Net services

Net Primary incomes

Net Secondary Incomes

Balance of merchandise trade= sum of exporting and importing goods

Net services= sum of exporting and importing services

Net Primary incomes= 2 way flow of cash

Net Secondary Incomes= one way flow of cash

how is the current account calculated

Balance of merchandise trade + net services + net primary income + net secondary income = current account

what do exports do relating to exchange rates

-exports are when countries buy AUD meaning more money enters Australia

-this causes AUD to increase

-demand for AUD to increase

-exchange rates increase as AUD becomes more valuable

what do imports do relating to exchange rates

-imports are when Australia sells AUD meaning money leaves Australia

-decrease in demand for AUD

-Increase in supply of AUD for foreign countries

-Exchange rates decrease as AUD becomes less valuable

how does a current account deficit impact aggregate demand

lowers aggregate demand because it means a country is importing more than exporting reducing the money from exports

how does a current account deficit impact the Government

Leads to higher debt and interest payments as the gov is required to borrow money due to more money leaving than earned

how does a current account deficit impact Australian owned businesses

lose money and production as people are buying from overseas, job loss and eventually business closure