What is a likely benefit of increased national specialisation?
It guarantees a balance of trade in goods and services surplus.
It increases dependency on other economies.
It lengthens international supply chains.
It reduces the cost of living.
Read the source material carefully before answering Question 1.
Source material: The United Arab Emirates (UAE)
The number of foreign nationals living in the UAE is higher than the number of citizens of the UAE. Labour mobility between the UAE and other countries is high with, for example, many daily flights landing in the UAE from India and Pakistan.
The UAE was the host of the World Expo in 2021-2022 where countries from all over the world demonstrated their economic achievements. The increased connection of people through migration, the trade of goods and services and the sharing of ideas were major features of the World Expo. Another common theme that was presented in the World Expo was the technological progress which has improved global living standards. Technological development has increased both the quality and quantity of the factors of production in the UAE.
This technological progress was supported by a huge amount of finance gained from their oil production and exports of oil. Oil is a necessity and its price inelasticity of demand has brought both advantages and disadvantages to the economy. Figure 1.1 shows the annual percentage change in the oil price and the annual percentage change in the UAE's balance on the current account of the balance of payments.
Figure 1.1 Annual percentage change in the price of oil and the annual percentage change in the UAE's balance on the current account of the balance of payments 2016-2022
Dubai, one of the cities in the UAE, is not dependent on oil as of its economy is non-oil based. Dubai is known internationally for its luxury tourism and financial services, which affect employment, tax revenues and export revenues. However, there are concerns over sustainable water use in a desert area and the level of inequality in the distribution of income.
Despite rapid changes in the economy, the value of the domestic currency, the dirham, has always been very stable as the government has maintained a fixed exchange rate system since 1980. This has helped maintain investor confidence in the economy. However, a fixed rate exchange rate affects the government's ability to deliver other macroeconomic objectives.
Identify two features of globalisation.
Explain the relationship between the oil price and the UAE's current account balance.
The table shows the retail price at which the same book can be bought in four countries.
What additional information is required to make a meaningful comparison of the price of the book between the countries?
direct tax rates
exchange rates
inflation rates
level of import tariffs
The Central African country Chad has a triangle-shaped population pyramid and a high level of poverty. It regularly has an overall deficit on the current account of its balance of payments. Chad usually has a surplus on its secondary income. However, its trade in goods, trade in services and primary income are all usually in deficit. Some economists suggest that the Chadian Government should impose import quotas to reduce its trade in goods deficit.
Define primary income.
Discuss whether or not imposing import quotas will reduce a trade in goods deficit.