4.1.2 - Specialisation and trade

Question 1

What’s economic growth

Answer 1

The increase in the real value of goods and servicesas measured by the annual percentage change in real Gross Domestic Product (GDP).

Question 2

What is absolute advantage?

Answer 2

This is when a country can supply a product using fewer resources than another country.

Question 3

What’s comparative advantage?

Answer 3

Comparative advantage refers to the relative advantage that one country or producer has over another.

Question 4

What’s a trading bloc?

Answer 4

Trading blocs are usually groups of countries in specific regions that manage and promote trade activities.

Question 5

What’s an exchange rate?

Answer 5

The purchasing power of one currency placed against another.

Question 6

What are imports?

Answer 6

Goods or services that are bought-in to one country from another.

Question 7

What are exports?

Answer 7

This is when goods or services are sold our from one country to another.

Question 8

What’s opportunity cost?

Answer 8

The next best alternative foregone.

Question 9

Name 2 popular things the UK exports

Answer 9

• Machinery - 15%
• Gems/Precious metals - 10.8%
• Vehicles - 9.1%
• Mineral fuels - 6.6%
• Electrical machinery - 6.2%

Question 10

Name the top 3 countries where UK exports go

Answer 10

• USA
• Germany
• Switzerland
• Netherlands
• Ireland

Question 11

What’s a trade surplus?

Answer 11

When a country’s exports are higher then their imports.

Question 12

What’s a trade deficit?

Answer 12

When a country’s imports are higher than their exports.

Question 13

Name 2 of 10 most popular countries that the UK has a trade surplus with

Answer 13

• Ireland - $1.1bn
• Hong Kong - $6.4bn
• USA - $3.2bn
• Saudi Arabia - $1.37bn
• Qatar - $1.1bn

Question 14

Name 2 of the 10 most popular countries the UK has a trade deficit with

Answer 14

• Germany - $37.7bn
• China - $34.8bn
• Netherlands - $23.6bn
• Norway - $15.2bn
• Italy - $12.7bn
• Canada - $9.4bn
• Spain - $7.4bn

Question 15

Name 2 reasons for a change in trade

Answer 15

• Changes in comparative advantage - UK used to be a manufacturer and now China and India are
• The terms for trade will change as other emerging economics will improve as they increase in value
• Over the next half-century world trade is expected to outpace GDP growth
• Change in exchange rates - The UK pound is strong against developing countries therefore making it more attractive to invest there
• Growth of trading blocs - The EU, AU, USMCA (NAFTA)