4.1 Benefits of International Trade (DP IB Economics: SL): Flashcards
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Define international trade.
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Cards in this collection (12)
Define international trade.
International trade is the exchange of goods and services between countries.
Define free trade.
Free trade occurs when there is no government intervention (such as quotas or taxes) to reduce or limit trade.
How does international trade affect the prices households pay?
International competition causes prices to fall, giving households the ability to buy more.
How does free trade widen consumer choice?
Free trade gives consumers access to a wider variety of goods and services, which improves the standard of living.
International cooperation required for trade helps countries build better relationships, which leads to lower levels of .
International cooperation required for trade helps countries build better relationships, which leads to lower levels of hostilities.
Why can free trade lead to economic growth?
Exports are a key component of GDP, so an increase in exports can lead to economic growth.
How does greater access to resources benefit an economy under free trade?
With increased access to raw materials, output can increase and costs of production can fall.
True or False?
Free trade tends to reduce the efficiency of domestic firms.
False.
International competition allows the most efficient firms to emerge, which improves the use of global resources.
Under free trade, what does a country do when the world price is above its domestic price?
When the world price is above the domestic price, the country's firms export the excess supply.
When the world price is above the domestic price, what happens to domestic supply and demand?
Domestic supply increases as producers are incentivised by the higher price, while domestic demand contracts.
True or False?
When the world price is below the domestic equilibrium price, a country will export the good.
False.
When the world price is below the domestic price, the country imports the good to meet its excess domestic demand.
When the world price is below the domestic price, the excess domestic demand is met through .
When the world price is below the domestic price, the excess domestic demand is met through imports.
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