闭前报告 wf final ra

1、International Education CollageShanghai University of Finance and EconomicsFinal World EconomyNFinance service year one1.0 explain the main characteristics of free trade32.0 identify three possible gafrom international trade43.0 define protectionism and barriers to trade with reference two forms of

2、protectionism.54.0 explain the roles world trade organisation(WTO) play to promote free trade development.65.0 explain the role of the European Union.66.0 construct a table showing recent figures of UK balance of payment and explain thecomposition of the UK balance of payment87.0 explain the main tr

3、ends of UK balance of payments in the last three decades.108.0 explain how exchange rates adjustment will lead to changes in balance of payment.119.0 for both fixed and floating exchange rate regimes1210.0 for newly industrialised countries (NIC) and less developed countries(LDCs)14Reference15Append

4、ix1621.0 explain the main characteristics of free tradeFree trade means goods and services could be exchanged freely between twocounties in international trade with the following two conditions. The first one isthat there is no barriers would be imposed to goods to any market. The other oneis that p

5、rice should be “economists price” which means all the cost relating toproduction, transportation and normal profit should be covered in the price.Absolute Advantage means a country can use less resources or money to produceparticular good or service to a good quality than another country.Comparative

6、 Advantage means a country which has a lower opportunity toproduce a good or service.Opportunity cost is when scarce resources are used to produce a commodity, anopportunity is foregone to use them to produce another commodity.It exists even when a country has an absolute opportunity.It is the basis

7、 for international trade.The example of this is the country A and country B.3Country ACountry BCountryA/country B20 cakes5 cakes4300kg candy120kg candy2.5Candy/cakes1524In country A, they have 1 resources can product 20 cakes or 300kg candy. In countryB they also have 1 resources to product. They ca

8、n only product 5cakes or 120kgcandy. Country A have absolute advantage in product cars and rice. In country Aproduct cakes opportunity cost is 300/20=15. Country B opportunity cost is 120/5=24.The 24 is larger than 15.So opportunity cost in country B is larger than country A. Socountry A have compar

9、ative advantage to country B in producing cakes.2.0 identify three possible gafrom international tradeinternational trade refers to cross-border transactions of goods and services,generalimport and export trade by composed.(1) Increase world-wide output.Free trade have acceleration to every countrie

10、s andhelp their import and export.Countries can sell their goods and services to anothercountry to earn money.(2) Goods and services produced at lower cost.If one country produce one productneed one kind of chemical resources and this country must use this chemicalresources.This country have to impo

11、rt this resources.Like japan product mobile phoneneed chemical resources,they need to import from china.In the past must pay must tobuy this resources but now free trade can help them to save costs.(3) Greater range of commodities for consumers,more choice.Customers have morechoice to select goods a

12、nd services.For example in the past customers can only by carproduced in China.But now,China customers can buy cars made in USA.43.0 define protectionism and barriers to trade with reference two forms ofprotectionism.Trade barriers are restrictions to the exchange of foreign products or services.Tar

13、iffs are taxes or customs duties which added to foreign products in order toartificially raise their price to suppress domestic demand. For example, Chinaimposes tariffs on the imports of larger-engine US cars such as some types of carsof JEEP and FORD.Non-tariff barriers to Trade (NTBS) are methods

14、 that a country uses to restrict andcontrol imports without using tariff measures. There are various types of non-tariffbarriers such as Quotas, Embargoes, Exchange Controls and so on. For example,EU detected the chloramphenicol of agricultural products from China is overstandard under its high stan

15、dard in 2001. Then, the EU banned the animalproducts to enter into European countries and this lead to a big lost to Chineseexport. This belongs to Product Standard Procedure of Non-Tariff Barriers.In economics, protectionism is restricts on import in international trade to protectdomestic goods in

16、the market from competitive foreign goods and provideconcessions to domestic commodities in order to enhance their internationalcompetitiveness and policy.Protecting employment can be used to explain whyprotectionism. Some countries think they should maintain domestic industries5employment. They wan

17、t to use more expenditure in domestic products rather thanforeign products. For example, American government restricted the imports ofcars in order to protect Detroits employment. Protecting industries is anotherexplanation. For example, the United States restriction on steel import was set upin 200

18、1 named “201” clause to protect its steel industry.4.0 explain the roles world trade organisation(WTO) play to promote free tradedevelopment.WTO is one of the most important international economic organizations in theworld.WTO plays an important role in global trade roles. It promotes the liberaliza

19、tionof world-wide trade and globalization of economic and makes a great decline intariff in worldwide through tariff and trade agreements to promote theliberalization in free trade greatly. Whats more, it can settle member statesdispute and strength the world trade system.5.0 explain the role of the

20、 European Union.The European Union is the most important and successful regional trading bloc inthe world today. The EU is made up of 28 member countries with a combinedpopulation of over 500 million. EU has its own currency and production factorscan flow freely.6Countries in a geographical region c

21、an gain a lot of roles from trading. The firstone is free trade. For example, people who live in Britain can get foods mucheasier than before and workers can also find a job easily in foreign country.Another role comes from single currency. Single currency helps people to reducecost since there is n

22、o need to exchange currency. And eliminate trade barriers. Themember countries can trade easier than before.There are a lot of roles from EU. It can speed up the circulation of goods andcapital. This is good for the growth of economic and investment. Besides, it isgood for employment since people an

23、d capital can flow freely under the principleof EU.76.0 construct a table showing recent figures of UK balanceofpaymentandexplain the composition of the UK balance of payment.UK balance of payments consists of four accounts,namely, current account,capital account, financial account and net errors an

24、d omissions. There were onlycurrent account and capital account in the past and capital account is divided intocapital account and financial account now.Current account pays attention to income and expenditure in current year. Thecurrent account is made up of Trade in Goods, Tradeervices, Income and

25、Current Transfers.When it comes to Capital account, Capital Transfers isdebt forgiveness whileAcquisition/disposalofnon-produced/non-financialassetscontasalepurchasing such as copyrights and trademarks.8To financial account, its categories are same as the income account, namely,foreign direct invest

26、ment (FDI), Portfolio flows, other investments and Change inofficial reserves.Net Errors and omissions is the item which is used to balance all balance sheets.As is shown in the graph, the current account had surplus from 1980 to 1986.After that, the current has deficit and the scales of deficit has

27、 a dramatic increaseafter 1997.9The graph illustrates the trend of the capital account of UK from 1980 to 2010. Therewas a slight rising trend from deficits to surplus for the year from 1980 to 2010.As is shown in the graph, the financial account has both surplus and deficits from1976 to 2006. After

28、 that, the scale of surplus had a big increase and up to 12millionin 2006.7.0 explain the main trends of UK balance of payments in the last three decades.10As is shown in the graph, trade in goods often deficit and the scales of deficitincreases from 1981 to 2011. Tradeervices has surplus from 1981

29、to 2011 andthe scale is small. The reason for the deficit of trade in goods may because of thehigh labor cost. Good education may lead to the surplus of tradeervices.8.0 explain how exchange rates adjustment will lead to changes in balance ofpayment.Exchange rate is the rate when one currency is exc

30、hanged for another. It isregarded as one countrys currency value to another currency.If the currency is appreciated, the imports will be cheaper and the exports will bemore expensive and this may lead to the deterioration in Trade in Goods. Theappreciation of currency will also increase investment f

31、rom overseas since thehigher profit in home currency. The import transactions will be shown in UKscurrent account. Thus, the deficit of the balance of payment account will occur.This will not only reduce the companys income but also decrease the capital andfinancial account.However, if the currency

32、is depreciated, exports will be cheaper while importswill be expensive which lead to the improvement in Trade in Goods since thegoods and services of the company are relatively lower than abroad and people arewilling to buy products in the country. The depreciation of the currency willincrease the c

33、ountrys exports and it will makes great profit of the company. Thus,the capital account and financial account will be increased.119.0 for both fixed and floating exchange rate regimes.The first effect of floating exchange is that the business will not be influenced andinflation or deflation may not

34、happen since the center bank has high autonomy.Besides, the investments may have risks since the different prices in global market.Whats more, floating exchange rate is uncertain. This will enforce people tospend more moneyome extent.The first effect of fixed exchange rate is that businessman will m

35、ake long-terminvestment since it is certain and has low risk. Whats more, the purchasing abilityof the labor will reduce since the decrease of their wealth. The fixed exchange ratewill cost more time of center bank as well since the center bank must maintain thefixed exchange rate.The first effect o

36、f floating exchange is that the business will not be influenced andinflation or deflation may not happen since the center bank has high autonomy.Besides, the investments may have risks since the different prices in global market.Whats more, floating exchange rate is uncertain. This will enforce peop

37、le tospend more moneyome extent.The first effect of fixed exchange rate is that businessman will make long-terminvestment since it is certain and has low risk. Whats more, the purchasing abilityof the labor will reduce since the decrease of their wealth. The fixed exchange rate12will cost more time

38、of center bank as well since the center bank must maintain thefixed exchange rate.The advantages of Floating Exchange Rates:The first advantage is that the expectation of it is to provide an automaticcorrecting mechanism and no intervention is required.Another advantage is that it will not become a

39、target of investment since themechanism needs to start to operate quickly in order to restore equilibrium nowonder which way it moves.Whats more, it will not harm other sections of the economy because governmentsdo not have to introduce measures in order to keep the value at a fixed rate.The disadva

40、ntages of Floating Exchange Rates:The first disadvantage is that it may cause uncertainty since it is difficult forcontractors to know which rate they will finally have to pay or be paid in.Another disadvantage is that demand may be unstable since domestic goodsexternal prices will be changed and it

41、 is difficult to planning production.Whats more, a floating exchange rate will not always deal with the inflationeffectively since the currencys deprecation in foreign exchange market will helppossible cost push inflation.Fixed Exchange Rates advantages:One of Fixed Exchange Rates advantages is that

42、 it can reduce uncertainty forlong term contracting and investing since it makes the value of the currencystable.13Besides, there is less risk for long-term granting of credits, long-term contractsand investment overseas to carry.In addition, fixed Exchange rate can also increase investment, especia

43、lly inforeign countries.Fixed Exchange Rates disadvantages:The first disadvantage is that it is difficult to handle a balance of paymentsproblem since the actions influence the domestic economy.Another disadvantage is that it may take some time before changes effects areseen.The third disadvantage i

44、s that any action to deal with deficit or surplus must becharged with domestic economy.10.0 for newly industrialised countries (NIC) and less developed countries(LDCs)A)The first characteristic of LDCs is the low life expectancy. For example, theaverage life expectancy of countries in the south of A

45、frica is 57. It is far awayfrom the average life expectancy in European Union which is 80.The second characteristic is the low level of education. For example, thepercentage of the secondary school enrollment of Afghanistan is much lower thanthe average of world.B)Dealing with the external debts is one issue facing NICS. For example, Greece14had a great debt since the poor economy a