Exam (elaborations)
Exam (elaborations) Unit 4 ECON4 - Economics: The National and International Economy
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Full Macroeconomics Paper 2 June 2022 exam.
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National and international economyPaper 2
Context 1
Explain the reasons for changes in the value of exports from the
UK to the rest of the world. (15 marks)
Intro
World trade has grown faster than world output
Value of exports are changed due to multiple factors
o Appreciation of the currency
o Strong currency makes imports cheaper
o Imports cheaper and exports more expensive
o Inflation
Globalisation
Technological changes
Comparative advantage
Specialisation
Globalisation
Globalisation since 1990s have meant world trade has been able to
grow massively
Information, technological advancements, production and
manufacturing processes shared
World Wide Web
o Allowed information to be much more freely shared
Every process is carried out more effectively and productively
Country’s are operating on their PPF curve
Goods are transported easily
o Transport more easy
o Ships, cargos, aeroplanes more advanced
o Goods can reach countries more quickly
o Imports become much easier to access
UK has become reliant on other countries for imports of goods
because these goods are of a higher quality than the same goods
that they would produce domestically
o The countries that produce these have comparative
advantage in producing the goods
E.g – imports of cars from japan and china
o Better quality than domestically manufactured cars and
cheaper
, Inflation
As of recent years inflation has been prevalent within the UK
Cost push inflation
Rising oil prices
Ukraine war and OPEC crisis
Cost of raw materials have increased
More expensive to produce goods domestically
Cheaper to import
Appreciation of the currency
Pound has become stronger over the last 20 years
Stronger currency
Stronger exchange rate
This pushes price of imports down
Raises prices of exports
More appealing for UK economy to import as this would be the
cheaper option
Net exports have reduced
Value of exports have increased which reduces the amount of
exports
Diagram
AD/AS diagram
Shift inwards of SRAS curve
o Less domestic firms produce goods
AD curve shifts inwards
o Demand for exports decreases
Evaluate the view that international trade always benefits
nations. (25 marks)
Intro
Globalisation is the increasing interconnectedness of nations
International trade contributes to the development of low income
nations
However it has also hindered development in some nations
MNCs can exploit poorer nations
Positive and negative effects of globalisation and international trade
Depends on many factors and specific country
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