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11 Cards in this Set
- Front
- Back
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International competitiveness |
Measure of a country’s advantage or disadvantage in selling its products in international markets, price or non price factors |
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Relative unit labour costs |
Total labour costs of supplying goods and services per unit of output in comparison to another country |
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Relative export prices |
Prices of a country’s exports compared to the prices of exports of a country’s main trading partner, expressed as an index |
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Two factors that determine relative unit labour costs |
-cost of employing people- wage rate -productivity of those people employed |
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6 factors that influence international competitiveness |
-relative unit labour costs -regulation -taxation -quality of product -relative rates of inflation -exchange rates |
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Real exchange rate |
Nominal exchange rate adjusted to reflect the different inflation rates (and therefore purchasing power) of the currencies concerned |
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Equation for real exchange rate |
(Nominal exchange rate x domestic price level) / foreign price level |
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8 ways to increase international competitiveness, wether it is fiscal monetary or supply side, how it works and possible drawbacks |
-buying foreign currency- monetary -decrease interest rates- monetary -reduce minimum wage- fiscal -cut corporation taxes-supply -education and training schemes- supply -government spending on infrastructure- supply -privatisation and deregulation- supply -labour market reforms- supply |
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Three benefits of being internationally competitive |
-current account surplus -export lead growth increases AD and real GDP -low levels of unemployment as there is derived demand |
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Three Possible problems of being highly internationally competitive |
-difficult to maintain low wages -stronger currency -inflationary if demand side |
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Three problems of being internationally uncompetitive |
-increased unemployment -current account deficit -depreciation of countries exchange rate, possibility of inflation of imports |
