Eco (6 - International Trade)

Students should be able to:

1. explain the meaning of terms and concepts associated with international trade;
2. explain the rationale for international trade;
3. describe the primary factors that influence the level of international trade;
4. explain the concept of gains from trade;
5. explain the concept of terms of trade;
6. state the factors that influence the level of an exchange rate;
7. distinguish between the various types of exchange rate regimes;
8. distinguish between exchange rate appreciation and exchange rate depreciation;
9. distinguish between exchange rate devaluation and exchange rate revaluation;
10. distinguish between balance of payments and balance of trade;
11. list the constituent components of the balance of payments;
12. describe the entries that would appear in the balance of payments account;
13. distinguish between balance of payments surpluses and balance of payments deficits;
14. describe the factors that give rise to balance of payments surpluses and deficits;
15. state the possible consequences of balance of payments surpluses and deficits;
16. describe the possible remedies for balance of payments surpluses and deficits.

CONTENT
1. Definition of the following terms and concepts:
(a) balance of trade;
(b) current account;
(c) capital account;
(d) balance of payments;
(e) balance of payments disequilibria;
(f) tariff;
(g) Common External Tariff (CET);
(h) quota (non-tariff barriers);
(i) exchange rate;
(j) exchange rate regimes;
(k) World Trade Organisation (WTO).
2. The concept of comparative advantage and gains from trade. International trade as a “win-win”
situation.
3. Factors that influence International Trade:
(a) on the import side;
(b) on the export side.
4. Terms of trade.
5. Factors that influence the level of an exchange rate.
6. Fixed, Floating and Managed exchange rate regimes.
7. Appreciation and depreciation of a currency.
8. Downward and upward adjustments to the value of a currency.
9. Balance of payments as a balance sheet indicating all the international transactions with the rest of
the world.
10. Balance of Trade as the difference between the values of exports and imports of visible and
invisible.
11. Current Account, Capital Account and the Official Financing Account.
12. Entries that would appear in the balance of payments account.
13. Surplus as excess of receipts over payments; deficit as excess of expenditure over receipts.
14. Factors that give rise to surpluses.
15. Factors that give rise to a deficit.
16. Possible consequences of balance of payments surpluses and deficits.
17. Possible remedies for balance of payments surpluses and deficits.