Topic 7- Competitiveness

Question 1

Measures of international competitiveness (4 measures)

Answer 1

1. Relative export prices
2. Productivity and unit costs of production
3. Current account/balance of payments
4. Unit labour costs

Question 2

Measures of international competitiveness (explanations)

1. Relative export prices
2. Productivity and unit costs of production
3. Current account/balance of payments
4. Unit labour costs

Answer 2

1. If 1 countries export prices ^ > decline in competitiveness
2. increase in relative productivity>industries can produce more with lower costs then UK will become competitive
3. if current account improves> value of exports has increased faster than imports> improvement in competitiveness. UK deficit=decline in competitiveness
4. high labour costs= less competitive goods&services

Question 3

Factors influencing international competitiveness (5 factors)

Answer 3

1. Unit labour costs
2. Productivity
3. Inflation
4. Exchange rate
5. Labour taxes or subsidies

Question 4

Factors influencing international competitiveness (explanations)

1. Unit labour costs
2. Productivity
3. Inflation
4. Exchange rate
5. Labour taxes or subsidies

Answer 4

1. higher in one country than its competitors> then its g&s= less competitive
2. higher productivity> g&s more competitive. Productivity is affected by factors such as quality&amount of capital e.g improved technology
3. Low inflation=more competitive as prices of goods will be increasing at a slower rate
4. Depreciation= exports cheap>more competitive. Appreciation=foreign currency price more expensive
5. Higher labour&corporation taxes>increase costs faced by firms>lower competitiveness

Question 5

Policies to increase international competitiveness (4 policies)

Answer 5

1. Improving labour productivity
2. improving the level of investment
3. Currency depreciation
4. Protectionist policies

Question 6

Policies to increase international competitiveness (4 policies)
1. Improving labour productivity 
Eval
2.improving the level of investment 
Eval 
3.Currency depreciation
4.Protectionist policies

Answer 6

1. increasing spending on education&training to help develop skills&close skills gap. Eval: Expensive&takes time
2. Investment grants, subsidies and tax incentives> ^competitiveness&encourage new product development. Lower interest rates> ^investment Eval: Too low interest rates> ^consumption>demand pull inflation>worsen competitiveness
3. Depreciation would improve competitiveness. Depreciation may be due to low interest rates. However, in many countries this is controlled by central banks rather than the gov.
4. Can make domestic firms less competitive in a market