Single Market (8.1)

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Single Market (8.1)

Single market: the economies of different countries can be treated as one when a firm is considering its domestic market.

Advantages:

  • Free movement of capital
  • Free movement of labour
  • Competition
  • Higher economic growth and standard of living
  • Specialisation and economies of scale

Disadvantages

  • Job losses
  • Attract capital and jobs away from poorer countries
  • Manufacturing costs are attracted to low labour costs
  • MNCs drive out local firms
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Single Currency (8.1)

Single Currency: a group of countries agree to adopt the same currency and to have one monetary policy

Advantages:

  • Elimination of exchange rate risks
  • Price transparency (easy to compare)
  • Transaction costs
  • Employment
  • Long-term planning
  • Single monetary policy

Disadvantages:

  • Sensitivity to interest rates
  • Recession
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Protectionism (7.6)

Protectionism: where an action is taken that reduces international trade

  • Tariffs
  • Quota
  • Embargo
  • Regulations

Why protect some industries?

  • Infant industry
  • Dumping
  • Protect jobs
  • Prevent negative externalities
  • Political
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The World Trade Organisation (7.4)

Free Trade: an absence of tariffs, quotas and regulations designed to reduce or prevent trade among nations.

What are the benefits of free trade?

  • More choice of goods at the lowest price possible
  • Increased competition encourages firms to innovate
  • Exports of goods and services will increase economic growth
  • Encourages efficiency
  • Increases world output and wealth
  • Prevents monopolies
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Multinationals (7.2)

Multinational company: a company that has operations all over the world

Advantages:

  • Cheaper labour costs
  • Gaining a strong foothold in international markets
  • Ability to take advantage of the different strengths of many countries
  • Transport/ distribution costs
  • A favourable tax environment
  • Availability of government grants

Disadvantages:

  • Loss of jobs
  • Export of technology
  • Dependency on imports
  • Loss of tax revenue
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