Question

In: Finance

1) Elaborate on the concept of competitiveness. How does it affect trade in goods and services?...

1) Elaborate on the concept of competitiveness. How does it affect trade in goods and services? Is it necessary that the current account will improve? What are the conditions for the current account to improve?

2 )Compare and contrast autarky with free trade. Talk on the pros and cons.

3) Define the current and financial accounts.

Solutions

Expert Solution

1. concept of competitiveness?

competitiveness is the capacity to deliver goods and services more effectively and efficiently than competitors. This means maintaining success in global markets without any subsidies or protection.

2. How does it affect trade in goods and services?

If a country is unable to provide a good or service in an effective and productive manner than Its cost is more. In such a case it's prices will be more and it will be unable to compete with other global players.
Trade-in goods and services with follow a premium path of that of beneficial and valuable. Only the best will survive in the market.
It's is a common sense of International economics.
Be efficient to gain money.

3. Is it necessary that the current account will improve?

No, it's not necessary-
Presume, the UK is unable to provide a good which provides value and cost-benefit in global markets. Then it exports will be less and imports will be more because even a UK citizen will buy Foreign goods as it provides value for money.
Hence a current account deficient.

4. What are the conditions for the current account to improve?

A country needs to improve its competitiveness to be able to improve its current account. It needs to provide value for money goods in the international market. In short, the country needs to become more and more efficient and effective in producing it's good and services.


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