macro- the global context

open economy

open economy

one nation is free to trade openly with another

what process has allowed for easier and increased international trade

globalisation

what does successful international trade provide an economy with

source of foreign exchange and more GDP, more capital equipment and technology, injection of demand into CFI, increased employment due to new industries surrounding exports, increased consumer choice, more availability for goods and services

how can international trade benefit emerging economies

raise their GDP as there is a larger market for their export of goods, provision of capital goods, more information and expertise, economies of scale

how can international trade benefit developing countries

foreign markets provide ability to exploit economies of scale (higher production leads to less cost per unit), usually very high demand due to lower prices, capital goods and machinery to boost production, fair trade agreements increasing income for primary sector workers

how do developing and emerging countries suffer when it comes to international trade

limited spending power as home incomes are small, unable to exploit economies of scale, lack of expertise to build capital goods, primary production domination (low productivity and volatile)

what are the issues with high exports in international trade

reliance on exports is not sustainable in the long run as financial crashes (e.g 2000s financial crisis) could lead to less trade

how does international trade link to poverty

trade can reduce extreme poverty as more exports raises the income for countries, provides jobs too

terms of trade

relative price of goods that are exported compared to the cost/ prices of imported goods

how are the terms of trade measured

index of export prices/ index of import prices x100

how does a change in the terms of trade index describe an economy

index goes up then terms of trade have improved, index goes down them terms of trade have deteriorated