3.7.5 Analysing the external environment to assess opportunuties and threats : economic change

What is ‘free trade’?

when countries buy and sell goods and services with each other without restrictions e.g tariffs (taxes), quotas (limits)

What is ‘Protectionism’

When a country tries to protect its own industries from foreign competition by making imports more expensive

How does Protectionism protect an country’s industries from foreign competition?

It helps make local producers safer from being undercut by cheaper or better foreign goods keeping local businesses successful

What are ‘Import Quotas’?

Limits on how much can be imported

What are ‘Tariffs’?

A tax on goods coming from another country (imports)

What are ‘Subsidies’?

Money the government gives to local producers to help make production cheaper to encourage production and lower prices

What are some arguments for Protectionism?

• protecting jobs (keeps local workers employed)

• protecting new industries (new industries have time to grow before they have to compete globally)

• national security (keeps control over necessities e.g food and weapons)

• balances trade (reduces chances of buying way more than you sell)

What are some arguments against Protectionism?

• higher prices for consumers

• less choice for consumers

• inefficient industries (if local producers are protected they might not try to improve as there’s no real competition)

• hurts global trade (slows down growth for everyone as local companies don’t improve)

What is a ‘Boom’?

times where a country may enjoy high consumer spending

What are the advantages of a Boom?

• low unemployment

• high wages

• increased demand for goods

What is a ‘Recession’?

When countries experience low levels of demand

What is ‘Monetary Policy’?

action that the central bank or government can take to influence how much money is in the economy e.g bank rate

What is ‘Bank Rate’?

the rate of interest set by the Bank of England

What is ‘Interest’?

the cost of borrrowing and the reward for saving

What are the disadvantages of a ‘Slump’?

• very little investment in businesses

• high levels of unemployment due to demand falling to its lowest

What is a ‘Slump’?

it is the bottom of the business cycle where consumer spending and confidence is at its lowest

What are the disadvantages of a ‘Recession’?

• businesses have to make redundancies to lower costs

• consumers demand less as they want to save rather than spend

• they borrow less money as they worry about interest rates increasing

What’s is ‘GDP’?

the monetary value of everything produced in a country within a certain time