Question 1

What is international trade and why is it important in the global economy?

Accepted Answer

International trade refers to the exchange of goods and services between countries. It is crucial in the global economy because it allows countries to specialize in the production of goods where they have a comparative advantage, leading to more efficient resource allocation, increased economic growth, and access to a wider variety of products for consumers. This concept is a key part of the Edexcel IGCSE Economics curriculum under The Global Economy.

Question 2

How does comparative advantage influence international trade?

Accepted Answer

Comparative advantage is the ability of a country to produce a good or service at a lower opportunity cost than others. It influences international trade by encouraging countries to specialize in producing goods where they have a comparative advantage, thus increasing overall economic efficiency and trade volume. This principle is fundamental in understanding international trade dynamics in the Edexcel IGCSE Economics syllabus.

Question 3

What are tariffs and how do they affect international trade?

Accepted Answer

Tariffs are taxes imposed on imported goods and services. They affect international trade by increasing the cost of imports, which can protect domestic industries from foreign competition but may also lead to higher prices for consumers and potential trade disputes. Understanding tariffs is essential for students studying The Global Economy in the Edexcel IGCSE Economics course.

Question 4

What are the benefits and drawbacks of free trade?

Accepted Answer

Free trade involves the removal of barriers to the exchange of goods and services between countries. Benefits include increased economic efficiency, lower prices for consumers, and greater variety of goods. However, drawbacks can include job losses in industries that cannot compete with foreign imports and potential negative impacts on the environment. These aspects are important considerations in the Edexcel IGCSE Economics curriculum.

Question 5

How do exchange rates impact international trade?

Accepted Answer

Exchange rates determine the value of one currency in terms of another and can significantly impact international trade. A stronger currency makes exports more expensive and imports cheaper, potentially reducing a country's trade surplus. Conversely, a weaker currency can boost exports by making them cheaper for foreign buyers. Understanding exchange rates is vital for students studying International Trade in the Edexcel IGCSE Economics syllabus.

International Trade

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