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Fundamentals of Business Economics

CHAPTER 5 – MACROECONOMICS II – THE INTERNATIONAL
ECONOMY

5.1 A

By specialising in production of goods which can be made relatively cheaply
and trading with others who specialise in producing different products, all can
become better off.

5.2 D

The balance of payments itself must balance. A surplus will be reflected in an
inflow of currency and reserves, a deficit will show an outflow.

5.3 C

The statement which is incorrect is that a current account deficit is a sign of
weakness, while a surplus is a sign of strength.

5.4 C

A sudden discrete fall in the fixed exchange rate which the government commits
itself to defend is called a devaluation.

5.5 B

The WTO is an organisation concerned with trade agreements and associated
matters, and seeks a reduction in barriers to trade. The minimisation of trade
barriers is its primary aim. The WTO may see the others as desirable, but they
are not its direct concerns.

5.6 GAP 1 – G (ENVIRONMENTAL),

GAP 2 – C (LEGAL),

GAP 3 – F (TECHNOLOGICAL),

GAP 4 – A (POLITICAL)

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