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Summary - Unit 4 ECON4 - Economics: International Trade and The Balance of Payments
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Detailed revision document with essay questions and essay plans on international trade and the balance of payments.
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International Trade and Balance of Payments revision‘Discuss the role of international trade in shaping a country's balance of payments’. (25
marks)
In your answer, explore the significance of exports and imports, the impact of trade deficits
and surpluses, and the effectiveness of policies aimed at improving the balance of payments.
Support your argument with relevant theories, diagrams, and real-world examples, and
critically evaluate the challenges and opportunities posed by international trade on a
nation's economic stability and growth.
USING THE DATA IN THE EXTRACTS AND YOUR ECONOMIC KNOWLEDGE,
EVALUATE THE VIEW THAT THE USE OF PROTECTIONISM IS INEVITABLY
DAMAGING TO ECONOMIES.
Benefits of Protectionism
1. Protects jobs
2. Protects infant industries – an industry that has a lot of potential
and is capable of competing with established firms in the future – but
they have a high risk of going out of business early in the business’
life
3. Ban specific products that are bad for society
4. Increases independence
5. Protects against ‘dumping’ - when companies sell goods abroad at
below production costs in order to put competitors out of business
6. Can correct imbalances in the Balance of Payments
Disadvantages of Protectionism
1. Increased costs for consumers
2. Decreased variety for consumers
3. Decreased global efficiency due to less specialisation and division
of labour
4. Misallocation of resources
5. Trade war potential
6. Companies can grow too dependent on protectionist policies. Once
they’re removed, these companies could easily go out of business
, Evaluate the view that international trade always benefits nations.
Discuss the view that free trade is more effective than aid in promoting economic
development in developing countries.
Assess the view that developing economies should pursue protectionist policies to achieve
greater economic development.
Discuss the view that protectionist policies should be introduced to protect UK firms.
Discuss whether governments should be concerned about changes to a country’s balance
of payments position brought about by globalisation.
Discuss whether globalisation benefits the balance of payments in developed countries
more than developing countries.
Assess whether policies to improve a country’s trading position can improve a country’s
current account.
1. In light of the trend towards globalisation, discuss whether Singapore currently adopts
the best policies to achieve her macroeconomic goals. [25]
(globalisation)
2. The recent worldwide recession and rising prices of oil and other commodities caused
many problems such as rising inflation and increased economic vulnerability.
Discuss whether Singapore should stay open and integrate with the global economy to
achieve its macroeconomic objectives in the light of the above problems. (25)
(globalisation)
Q3. With increasing globalisation, Singapore has to invest ahead in the fundamentals that
will drive Singapore’s economic success and ensure that growth remains inclusive,
benefiting all members of society, while encouraging a spirit of self-reliance. The
government also has to ensure that resources are allocated efficiently in order to ensure
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