- Home Test:
Subject: Economics
Topic: International Trade and BoP
Maximum Marks: 20
Time Limit: 30 Minutes
Question 1: Discuss whether specialisation is the only way to achieve the higher level of economic development. [10]
Question 2: Discuss up to what extent do you agree that balance of payment is a true parameter to analyse the strength of a country. [10]
Last date for Submission: May 20th, 2014
Please set your time and be honest with you work.
1. Specialisation is not the only way to increase economic development, there are many other way to increase economic development such as, increasing new invention in the country, this can increase exports to other country and will increase the economic development because people will get a new job to produce the new inventions, other way is to increase literacy rate, because if the literacy rate increase, there will be more educated people that can work better than uneducated people, this will increase the economic development, supporting investor to invest in the country will also increase economic development because it automatically increase the employment of the country and increase gdp per capita, which will increase the standard of living of the country, because basically economic development is increase in standard of living.
ReplyDelete2. Balance of payment is a true parameter to analyse the strength of a country because it records every transaction between a country and other country, balance of payment usually contain visible trade between countries, such as exports and imports of goods. It also contain invisible trade, such as imports and exports of services between countries, BoP also record the income or payment of the country, such as the wages of residence that work in other country or wages that paid to other country residence that work in the country, BoP also record current transfer, there are two types of current transfer, its debit and credit, the example of debit is charity given from overseas to the country or aid given by other country, the example of credit current account is charity given to other country or aid given to other country.
Christian 9B
Q1
ReplyDeleteEconomic development, which is a strong government objective as it affects the living standards, employment rate, life expectancy, literacy rate –all the way to the inflation rate—is achieved in different ways, including specialisation of goods and services, foreign direct investment and support and aid from the government.
Specialisation, which is when a country specialises in producing a particular good or service from its resources by means of natural resources, skills, expertise and technology of the country, such as italian shoes and belgium chocolate, is a tool for the government to develop the economy. This can be done since, as a country has a comparative or even absolute advantage in producing a particular good/service, leads to high aggregate demand from foreign countries, thus the exported goods rise, causing total revenue to rise as well.
Although specialisation develops a country, it is not just the only factor that influences the economic development of a country. Other factors such as foreign investment, government expenditure and government support towards the local people are also key elements into developing an economy.
As a country experiences a rise in foreign investment, this can help produce fierce competition between local and foreign firms, thus the consumers are also able to benefit from the wide variety of goods and services sold as well as cuts in prices of items sold since each firm is trying to beat one another through its sales. Also, as the foreign manufacturing and service industries increase in market size, foreign direct investment (FDI) also increases, causing higher employment rates as more people are needed to meet aggregate demand and the appreciation of the value of the local currency.
Another element is public revenue. Taken from income taxes, corporate taxe, import taxes and etc, when used efficiently and correctly, the government will be able to use the nation’s money to improve the infrastructure, lower the inflation rate, increase education levels in the country and increase the number of subsidies imposed to necessities that can contribute to lower poverty levels, which can all expand and develop an economy as the workforce is ready to ‘work’. Also, with increased support from the government for innovative ideas to produce out-of-this-world items or to improve a certain good or service may eventually increase exports for these items, improving the balance of payment in a country as well as demonstrating to others to become more inventive and innovative in the country. With more skillful and trained labourers, and better government control over the national objectives of a country, the country is able to develop with proper guidelines and clear rules and regulations.
In conclusion, yes, specialisation is apart of developing an economy, but this does not mean other elements like foreign direct investment and a better use and support of the government should be ignored.
Q2
ReplyDeleteThe balance of payment is the calculation of monetary inflow and outflow of a country, and basically acts as a balance sheet towards the country, which includes a series of accounts such as the current account, capital account, net errors and omissions and financial account.
In the balance of payment, the current account is calculates the total factor of payments, such as interest, dividend and wages, the total exports and imports of the business (both visible and invisible goods) and the transfer payments like government aid and grants towards other countries. After calculating everything, this will produce a current account balance which provides useful information on whether a country is a net borrower (current account deficit) or a net lender (current account surplus).
Although the current account provides handy knowledge in the country’s expenditure and revenue, it still lacks the understanding of the country’s economic position. By using the capital account, which measures the Foreign Direct Investment in the country and the total capital goods produced, this demonstrates the as the rise or fall in of the attraction of the country to foreign investors, and how much foreigners are willing to invest in the country. Also, with the financial account measuring the total investment in shares of local firms in the country, altogether this provides great accuracy in the financial position of the country, showing the attraction and investment from other countries.
The errors and omissions is also apart of the balance of payment as it adjusts imbalanced accounts and turn them balanced, whether surplus or deficit, mainly from the government reserves.
All in all, the balance of payment is able to show the country’s development and is used to identify the economic challenges faced by the country. Yet, its poor limitation is that all that is measured are only figures, not knowing what’s behind it. There are many non-monetary factors contributing to higher current, financial and capital accounts or lower ones, many due to natural disasters in and out of the country (transfer payments) or even a corrupted government system.
In conclusion, the balance of payment is a relatively great parameter to analyse the strengths and weaknesses of a country due to its demonstration of current account, financial account and capital account, thus providing fairly accurate knowledge of the country’s position as well as the knowledge of the country being a net borrower/lender.
1.
ReplyDeleteSpecialization is the production of one or just a few goods and services. In other words, it refers to how an individual, organization, state or country focuses available resources. Another country may choose to specialize in cheese. Each produces more than what they need in order to obtain other goods at a lower cost. Specialization increases the level of economic activity. Economic development can be defined as a sustained community effort to improve both the local economy and the quality of life by building the infrastructure to adapt to economical change.
Specialization is one of the ways to achieve higher economics development because it can help to increase efficiency since it includes division of labor. Worker specializes in a particular task and gives in the best, then producing goods faster and less wastage of material. Specialized machinery can be used which is more increase the productivity. Improvement in efficiency and the use of machinery output is increased. There is no time wasted in switching of jobs and thus the momentum of production can be maintained which leads to less wastage of time.
To sum it all up, specialization is not the only way to increase the economic development whereas there are other ways to increase economic development such as increasing the productivity in a country like increasing more inventions, to have exports more than imports and etc.
2.
Balance of payment is the difference over a given time between total payments to other countries, from imports of goods and services. The balance of payments accounts of a country record the payments and receipts of the residents of the country in their transactions with residents of other countries.
So indeed the balance of payment is the true parameter to analyze the strength of a country.
Imports are goods and services produced by the foreign sector and purchased by the domestic economy. In other words, imports are goods purchased from other countries. Exports are the sale of goods to a foreign country. The United States, for example, sells a lot of the stuff produced within our boundaries to other countries, including wheat, beef, cars, furniture, and, well, almost every variety of product you care to name. An excess of imports over exports immediately sends dollar bills overseas while bringing real goods and services into the country for immediate use. If foreigners want to hold onto those dollars, while we get to put their goods to immediate use benefiting our consumers and creating new investment for our industries. Balance of payment recorded the income and payment of the country, such as the wages of residence that work in other country or wages that paid to other country residence that work in the country.
In conclusion, balance of payment is the true parameter to analyze the strength of a country because of factors that support it. It is the parameter also because balance of payment basically control the monetary inflow and outflow on the country.
Valerie Lie
9Business
1) There is another way to increase the economic development by giving the people in the countries education,supporting the local firms , foreign investment, and build a better infrasturcture in the countries.The government can use specialization also to help the country development but there is also a certain factors that can be used
ReplyDeleteWhen the government give people in the countries education they will be more educated , so the rate of unemployement will reduce and more people will be employed.The government can also provide more skillfull labour to the company and it can attract the foreign company to invest in the countries when they see the opportunity to use the labour and resources in the countries efficiently. The government can also increase the standard of living of the people by builiding a better infrastructure such as providing better road ,and facilities.
Specialization can also be used since it help the countries to produce a certain goods and services in the most effective way , the countries have advantage to sell their goods a broad with a higher quality and cheaper that can attract a lot of demands.
2) we can use the balance of payment to anaylse the strength of the countries since it records all of the transaction of the countries with the rest of the worlds, it provides a complete information about the countries trade with other countries , so it's easy for us to meassure the strength of the country based on the countries trade activities.
The current account is divided into 3 parts the first is current acocunt it consist of the inflow and outflow of the countries,capital account ,financial account. We can know the strength of the countries since we can see the totak of the countries monetary inflow (export) and outflow (import),from here we can determine the strength of the countries either the balance of payment is positive or negative.
If the balance of payment is postive that mean the countries export a lot of goods ,they produce more goods ,and consume less import goods.which is good for the countries if the have positive BOP.But when the countries balance of payment is negative this mean they export less but import more goods. It can weaken the countries exchange rate when the balance of payment is negative and it can discourage the foreign direct investment in the countries.
So we have a conclusion that if the countries have a positive balance of payment that mean the countries have a stable exchange rate but if the countries have a negative balance of payment we can assume that the countries have a weak exchange rate and it can brings a lot of bad effects to the countries.
Question 1
ReplyDeleteEconomic development means the increasing of standard of living in a country, there are many other way to increase economic development, such as increase useful new inventions in the country or increase the literacy rate of the country.
Specialization is not the only way to increase economic development, there are many other way to increase economic development such as, increasing new invention in the country, this can increase exports to other country and will increase the economic development because people will get a new job to produce the new inventions.
Other way is to increase literacy rate, because if the literacy rate increase, there will be more educated people that can work better than uneducated people, this will increase the economic development, supporting investor to invest in the country will also increase economic development because it automatically increase the employment of the country and increase gdp per capita, which will increase the standard of living of the country.
In conclusion there are other way to increase the economic development in the country, but mostly specialization is the one that increase the economic development in the country because specialization increase the productivity of the country.
Question 2
Balance of payment contains three main account, it’s the current account, capital account and financial account. Current account usually contain trade between a country to another country, while financial account record an investment made in the country by investors from other country, a capital account used to record a name change of ownership in a country.
Curent account records transaction between a country and other country, balance of payment usually contain visible trade between countries, such as exports and imports of goods. It also contain invisible trade, such as imports and exports of services between countries, BoP also record the income or payment of the country, such as the wages of residence that work in other country or wages that paid to other country residence that work in the country, BoP also record current transfer, there are two types of current transfer, its debit and credit, the example of debit is charity given from overseas to the country or aid given by other country, the example of credit current account is charity given to other country or aid given to other country.
Financial account record investment made in the country, usually the investment is invested by people from other country, such as a new factory made in the country by multi national company or a real estate is bought by people from other country. While capital account usually record the change of ownership of a business, real estate or even stock, example is when people from other country buy a business from the country and the ownership is given to buyer who bought from other country.
In conclusion balance of payment is a true parameter to analyse the strength of a country because it provide many information about transaction of the country to other country.
Christian 9B
Q1:
ReplyDeleteSpecialization is when a country specializes in producing a particular good or service from its resources by means of natural resources, skills, expertise and technology of the country such as china they have a lot of supply of human worker so the country specialize in firm that require a lot of worker in china labor are paid low because the population in china is so high but its increase productivity of the country. Economic development can be done by many ways not only specialization. If government forces the people to specialize there will be monopoly other good or services that aren’t specialize by each sector happen in the country because the goods or services are limited. Three are many ways to develop a country such as building school so the children in urban are can good education so in the future the children can help get job in the future so there will be less unemployment. The government can build public facility to provide jobs to the people so they can get jobs and earn money to buy there needs that help a person to stay alive that help decreasing in death rate improve the standard of living in the country. Country can increase the economic growth by do more exporting goods to other country and limited the amount of importing so the BOP (Balance Of Payment) can help the country to growth.
The conclusion is specializing is on of the way to support economic growth but there are a lot of ways not only specialize only.
Q2:
The balance of payment is the calculation of monetary inflow and outflow of a country, and basically acts as a balance sheet towards the country, which includes a series of accounts such as the current account, capital account, net errors and omissions and financial account. Current account consists of inflow and outflow shows import and export of the country we can know how dependent to other country is the country from its import goods. Export shows how much goods and service are sold to other country import shows how much goods or service the country buys. Balance of payments and international investment position data are critical in formulating national and international economic policy. Certain aspects of the balance of payments data, such as payment imbalances and foreign direct investment, are key issues that a nation’s economic policies seek to address. Trade are buying and selling of goods or services import a credit entry and export a debit entry the sum of the export and import are trade balance. Import and exporting goods can effect currency rate of a country when a country have a lot of demand for the exported goods the currency rate will high if the currency is low the exported goods have less demand or not much.
Conclusion balance of payment is a good parameter to show the strengths or the power of a country to its amount of current account, financial account and capital account providing information of the country economic growth.
cavel edssel
Celine B
ReplyDelete9business
20/may-2014
Question 1:
Specialization may increase economic development since it makes sure that the business will focus in the production of a limited products or services in order to gain productivity and efficiency for the business itself, it concludes that one of the reasons the economy may increase higher development when the businesses or market is growing. Other examples than specialization are; helping the smaller businesses, increasing the FDI, etc.
These examples may set of to a growth in the economy, but there are other sets of examples that that are not from the businesses of the economy, some are because of the International Trade, the economy may grow when there are trade surplus, trade surplus is when the exports of a country are greater than imports ( monetary inflow is greater than monetary outflow ), it can make the economic currency higher and better, it will decrease the loans or other issues the economy might be having.
The labour factors are the skills and the education or training, it will affect to the employment rate because if there are too little labour factors, there will be no management and efficiency in the employment rate. The government should provide a great education center and growing infraastructures to led out the poverty and also the growth in market size and businesses, this will also affect the living standards of the households, there would have an increase in life expectancy and decreasing in death rate. The people living in the country would have resources and are employed and therefore they will be able to manage their life and not depend on the governments for their own future references to live, they could support and help the businesses and etc to grow.
Developement in technology will be a big change for the economic condition, business may grow, the market size would be bigger and the change for the infrastructures and the developemtn of living will have a massive change, the trading will be more since businesses are growing and the effiency would be higher.
In conclusion, the Economiy does not only depend on the specialixzation of one's product of the business and market size. There are other factors and indicators that can increase and develop the economy even more.
Question 2:
The balance of payment are be able to determine the strength of ones country. It can analyses the country and the condition by the recordings such as;
-current accounts
-capital accounts
-financial accounts
- errors and omission
Balance of payment (BOP) are the financial accounts of monetary inflow and outflows, monetary inflows are the money received by the country such as; payment from other countries from exports, transfer payments from other countries, investments in shares, etc. monetary outflows would refer to the the amount of money that the country has to pay to the other countries such as; payments of imports, factor payments to other countries, FDI, etc.
Every transactions the country makes will be recorded in the BOP, the current accounts will record the trade transactions of visible and invisible goods, profits, dividends, or other factors of payments. Financial accounts record the change in ownership of the country (such as investments in shares) and The capital account will record the creation of capital the country made, such as new assets (FDI).
These will represent the economic condition and transactions, if the BOP is positive it means that exports are more than imports which means it's good for the country and it proves that it produce more than they consume, but if the results are negative, it will conclude that the imports are greater than the exports, this is the formula:
price level of exports/ price level of imports x100
in conclusion, the balance of payment if very important to the country, it records of all the transactions and the monetary inflow and outflow, it will determine the trading of a country to the rest of the world and the condition of the going on course.
Specialisation is a condition where a certain group of people decide what they do best and decided to do it for a living. The more people living in an area, the more varied the products produced are. Specialisation helps company to set focus on their tasks and jobs. It makes sure the action taken matches with procedures.
ReplyDeleteSpecialisation does help improve a country's economy because it sets focus on what goods/services to produce. it also divides the country to several producer sectors to specialize at what they are good at. This way, production will be effective and efficient resulting in more supplies produced to meet demands from other countries (can be seen as possible exports areas). Monetary inflow might increase then .
However, the growth of an economy doesn't depend solely on it specialisation. The economy can also be affected by war conditions, advertisements, technology, etc. When war is happening, countries most likely experience recession because inflow is very less and purchase power of citizens decrease. The imrpvement of technology results in the more practical and efficient way to produce goods and services.
So, specialisation does affect the economy and its growth. But it does not solely depend on it only. Because other x factors can play a big role in a country's economy.
QUESTION 2:
Balance of Payments are calculations taken to know a country's monetary inflow and outflow through current account, financial account, and capital account. It is important because it shows how much money the country receives and spends. Of course, inflow more than outflow is very good, but only some countries can do that.
Balance Of Payments can determine a country's strength because it shows the countries' financial postition by looking at the countries' debts, imports,exports,etc. It sees whether a country can pay its debts and subsidise its citizens,etc. BoP involves FDI, imports, exports, factor payments,etc.
However, BoP cannot be he only indicator because there are other factors as well such as: demands/supplies (economic condition) within the country which does not include in the BoP calculation. BoP only calculates international trades while actually, to know a country's strength, we also have to see inside the country.
So, BoP can show a country's financial postion internationally because it jnvolves calculatikng outflows and inflows. However, we cannot totally depend on BoP to determine a country's strength because BoP doesn't measure conditions inside the country.
CHRISTHOPER MATTHEW (9Bus./ 03) (20/05/2014)
ReplyDelete1. In specialization, a country will analyze what they’re good producing at, and they can specialize by doing only what they’re good producing at, and with international trade, a country can trade the goods they’re good producing at with the other country’s goods they’re good producing at, so there will be an advantage over the trade. The advantages of specialization is that workers will get higher incomes because when they specialize their production, it means they’re good at making it, so there will be higher output, therefore workers will get higher incomes. When their incomes are higher, they will have a higher standard of living, and therefore poverty in a country might be reduced. But specialization has its limitations, which is if once a country the other country depend on suffers a recession/ hard times in producing the goods, that other country’s needs and wants might not be satisfied as they depend too much on other countries.
However, specialization isn’t the only way a country can achieve a higher level of economic growth. To achieve higher economic growth, a country can also do international/ free trade within countries. International trade itself means the exchange of goods and services with other countries, and once international trade is done, one country will have to integrate with the rest of the world, which is known as globalization.
Besides the advantages of specialization on international trade, there are also other advantages such as the increase in consumer choices. Secondly, there will also be increase in competition, so firms which produces similar products will compete and try to give their best quality products so consumers will buy from them, therefore, increases efficiency. And once international trade is done, there will also be a wider consumer market, creating additional business opportunities.
However, there are disadvantages towards the activity of international trade. First, because a country will try to specialize their production, there will be a rapid resource depletion, creating global warming/ climate changes. Therefore, as there are increasing demand and decreasing supply, prices of goods and services might rise. And once a developed country trades with a developing country, workers from developed countries might lose their jobs as a firm would like to employ better educated workers, which is from developed countries, so unemployment will increase in the developing country.
When international trade happens, there will be the activities of imports and exports. A country can achieve higher economic growth when they do more exports and less imports, therefore, there are more money inflows than outflows, which the money could be used for further development and growth of the country. And also, the currency of the country will also strengthen as there are more demand for the country’s currency as the other countries imports from this country.
To sum it all up, a country can’t achieve a higher economic growth only with specialization, but also international trade, and over-specialization is also not good for a country as it means they depend too much on other countries, and once that other country don’t provide goods and services for other countries anymore, the country might not meet its demand for goods and services, which will be a problem for the country.
CHRISTHOPER MATTHEW (9Bus./ 03) (20/05/2014)
ReplyDelete2. A business’s activities are all summed up into one balance sheet, which shows the business’s total assets, liabilities and capital. The same thing with a country, Balance of Payment (BoP) refers to the “balance sheet” of the country, so all of the country’s business activities are recorded here, that’s why it is a true parameter to analyze the strength of a country.
Balance of payment refers to the financial accounts of monetary inflows and outflows, which means the money they get from exports and the money they paid for imports, and a BoP consists of these components: current account, capital account, financial account. And in reality, a BoP is never balance, so Errors and Omissions will cover that up.
Balance of payment talks about the international trade between a country and the other, by the way it records monetary inflow and outflow in the current account. A BoP can therefore analyze the strength of the country by analyzing whether they have more inflows or outflows. When they have more inflows, it means they export more than they import, and the country’s currency rate will appreciate as demand for the currency increases, and there will be a surplus in the current account, which indicates the country’s economy is getting stronger. While when a country has more outflows, it means they import more than they export, so currency rate will depreciate as demand for the currency decreases, and there will be a deficit in their current account, which indicates the country’s economy is getting weaker.
Secondly, we can also analyze how strong a country’s economy is from the capital and financial accounts. When there are surpluses in these accounts, it means people overseas are interested/ thinks that investing/ buying ownership in the country is profitable, which is because the country’s economy strengthens. While the other way around, if these accounts experiences deficits, than it means there are less overseas people interested in investing/ buying ownership in the country as the country’s economy might be weak, so they think it’s not profitable.
In conclusion, I agree that balance of payment is a true parameter to analyze the strength of a country, as it basically shows every business activities happening within the country with other countries, and we can know whether the country’s economy is strong/ weak by analyzing the financial accounts of balance of payments, which is current account, capital and financial account.
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ReplyDelete