International trade and the global economy — AQA GCSE Economics
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International trade and the global economy explained
This section introduces the global economy, requiring you to understand why nations trade and the importance of international trade to the UK.
Read the full explanation
You must learn how to measure UK trade using the balance of trade and identify the causes of current account surpluses and deficits within the balance of payments. You need to explain how exchange rates are determined by supply and demand, and analyse their impact on producers and consumers. Furthermore, you should evaluate the advantages and impacts of free-trade agreements, including the significance of the European Union. Finally, assess the benefits and drawbacks of globalisation, considering the moral and ethical aspects of increased global trade and the role of multinational corporations.
Your focus
- Explain the causes of current account surpluses and deficits and how UK trade is measured.
- Analyse how exchange rates are determined and their effects on different economic agents.
- Evaluate the impacts of globalisation, free-trade agreements, and multinational corporations, including ethical considerations.
International trade and the global economy exam tips
Examiner Tips
- 💡When discussing exchange rates, always use the SPICED acronym (Strong Pound Imports Cheap Exports Dear) to quickly determine the impact on producers and consumers.
- 💡Ensure you can distinguish between the balance of trade and the current account, as exam questions often test this specific terminology.
- 💡Prepare balanced arguments for globalisation and free-trade agreements, ensuring you can discuss both economic benefits and ethical drawbacks involving multinational corporations.
Common Mistakes
- Confusing the balance of trade with the overall balance of payments; the balance of trade only measures exports and imports of goods and services, whereas the balance of payments includes other financial transfers.
- Assuming a current account deficit is always bad; a deficit might be caused by strong economic growth leading to high demand for imported capital goods, which can boost future productivity.
- Believing exchange rates are fixed by the government; in a floating system, they are determined by the market forces of supply and demand for the currency.
- Overlooking the ethical aspects of globalisation; students often focus solely on economic impacts like lower prices, ignoring moral issues such as the exploitation of workers by multinational corporations in developing countries.