Study Notes
International trade involves the exchange of goods and services across international borders, offering both benefits and challenges. Free Trade — trade without restrictions like tariffs or quotas. Example: Lower prices and increased choice for consumers. Protectionism — government actions to restrict imports to protect domestic industries. Example: Tariffs and quotas. Tariff — a tax on imported goods to make them more expensive. Example: A tax on imported cars. Quota — a limit on the number of goods that can be imported. Example: Only 1,000 units of a product can be imported. Subsidy — financial aid to domestic producers to lower their costs. Example: Government payments to local farmers. Trading Bloc — a group of countries that agree to reduce trade barriers among themselves. Example: The European Union.
Exam Tips
Key Definitions to Remember
- Free Trade
- Protectionism
- Tariff
- Quota
- Subsidy
- Trading Bloc
Common Confusions
- Confusing tariffs with quotas
- Misunderstanding the role of subsidies
Typical Exam Questions
- What is a tariff and how does it affect prices? A tariff is a tax on imports that raises their price.
- Why might a country use protectionism? To protect domestic industries and jobs from foreign competition.
- How do trading blocs benefit member countries? They reduce trade barriers, increasing trade and economic growth.
What Examiners Usually Test
- Understanding of the advantages and disadvantages of free trade
- Reasons and methods of protectionism
- Impact of tariffs, quotas, and subsidies on markets
- Role and impact of trading blocs