Topic 5 of 6 · Form 5
International economic issues
Absolute and comparative advantage; terms of trade (index of export prices ÷ index of import prices × 100); free trade and protectionism; trading blocs and economic integration (free trade areas, customs unions, common markets, monetary unions); the WTO.
Notes for this topic 1 file, in order
Create a free account to download PDFs.
Trade theory
Absolute and comparative advantage; terms of trade (index of export prices ÷ index of import prices × 100); free trade and protectionism; trading blocs and economic integration (free trade areas, customs unions, common markets, monetary unions); the WTO.
Worked example: Export price index 120 and import price index 150. Calculate the terms of trade.
120 ÷ 150 × 100 = 80 → terms of trade have worsened
Balance of payments
Current, capital and financial accounts; causes and consequences of imbalances; policies (expenditure-switching and expenditure-reducing).
Exchange rates
Floating, fixed and managed systems; determination; effects of depreciation (Marshall–Lerner condition and the J-curve); purchasing power parity.
Globalisation and development
Indicators (HDI, MEW, Kuznets curve); characteristics of developing economies; population and development; aid, trade and debt; the role of MNCs, the IMF and the World Bank.
Check yourself
- State the Marshall–Lerner condition.
- Give one difference between a customs union and a free trade area.
- What is the J-curve effect?
Show answers
- A depreciation improves the current account if the sum of export and import price elasticities is greater than one.
- A customs union has a common external tariff; a free trade area does not.
- After depreciation the current account worsens before improving, as demand takes time to respond.
Questions about this topic (0)
No questions about this topic yet.
Sign in or create a free account to join in.