The infant industry argument states that developing countries are justified to put tariffs on imports if they are seeking to develop new industries and diversify their economy. In particular, there is a justification for placing tariffs on industries where a country has a latent comparative advantage. This means that if they can develop infrastructure and economies …
Definition of Buffer Stock Scheme A buffer stock scheme is a government plan to stabilise prices in volatile markets. This requires intervention in buying and selling. Prices for agricultural products are often volatile because: Supply can vary due to the weather. Demand is inelastic Supply is fixed in the short term See: Why are prices …
Readers Question: Evaluate the possible consequences of a falling rate of inflation for the performance of the UK economy. A falling rate of inflation means that prices will be rising at a slower rate. A fall in the inflation rate could cause various benefits for the economy: Goods of that country becoming more internationally competitive …
Readers Question: Can you please discuss the nature of the current account deficit and the exchange rate in the UK along with the theory that would suggest there is a relationship between the exchange rate and the current account. A current account deficit implies the value of imports of (goods/services/investment incomes) is greater than the …
Is deflation good or bad? Mostly experiences of deflation in western economies have been damaging – deflation has been associated with falling rates of economic growth and higher unemployment. However, it is possible to have a different type of deflation – from rapidly improving productivity; then deflation can be consistent with higher rates of economic …
How can a change in the terms of trade affect the balance of payments ? How can a change in the balance of trade affect the terms of payments ? The terms of trade is the index of export prices divided by index of import prices (*100) The current account balance of payments is primarily …
Readers Question: what are the benefits and costs of a tariff on consumers, producers, employment levels and the government? The effect of tariffs on consumers Tariffs increase the cost of imports, leading to higher prices (P1 to P2) for consumers and a decline in consumer surplus. For example, UK consumers have lost out from EU …
Readers question: “Can an economy achieve low unemployment, low inflation and economic growth at the same time?” To achieve low unemployment, low inflation and economic growth at the same time is possible. For example, the UK economy 1993-2006 saw a prolonged period of low inflationary growth. Since early 2000, the Chinese economy has been growing …