International Business

Question

QUESTION 1

Explain FIVE elements of global trade.

(10 MARKS)

QUESTION 2

Elaborate FOUR methods of government intervention in fighting unemployment.

(10 MARKS)

Answer 1

Question 1: Elements of Global Trade

1. International Trade Agreements: These are treaties between countries that outline the rules and regulations for trade between them. Agreements like NAFTA or the European Union's single market are examples. They reduce tariffs, establish trade standards, and facilitate smoother and more predictable international business transactions.
2. Exchange Rates: The value of one currency compared to another greatly influences global trade. Fluctuations in exchange rates can affect the competitiveness of a country's exports and imports. Countries might try to manage their currency values through monetary policy to gain a trade advantage.
3. Global Supply Chains: This refers to the interconnected networks of production and distribution that span across multiple countries. Companies source raw materials, manufacture components, and assemble final products in different countries, often driven by cost efficiencies. Disruptions in these supply chains can significantly impact global trade.
4. Trade Barriers: These include tariffs, quotas, and non-tariff barriers like regulations and standards. While tariffs are taxes on imported goods, quotas limit the quantity that can be imported. Non-tariff barriers, though not direct restrictions, can also impede trade by making it harder for foreign products to meet domestic standards.
5. World Trade Organization (WTO): This international body helps regulate and facilitate international trade. It provides a platform for negotiating trade agreements, settling trade disputes, and establishing trade rules. It aims to ensure that trade flows as smoothly, predictably, and freely as possible.

Question 2: Government Intervention in Fighting Unemployment

1. Fiscal Policy: Governments can use spending and taxation policies to influence economic conditions. During high unemployment, they might increase spending on public projects to create jobs directly or provide tax incentives for businesses to hire more employees.
2. Monetary Policy: Central banks can influence unemployment through monetary policy. Lowering interest rates makes borrowing cheaper, encouraging businesses to invest and expand, leading to more job creation. Conversely, high interest rates can have the opposite effect.
3. Training and Education Programs: Governments can invest in education and training programs to improve the workforce's skill set. This approach is particularly effective in addressing structural unemployment, where there is a mismatch between the skills workers have and the skills needed for available jobs.
4. Unemployment Benefits and Social Support: While not directly creating jobs, these measures can help maintain consumer spending during economic downturns, thus preventing further job losses. They also provide a safety net for individuals while they search for new employment, potentially leading to a better matching of jobs and workers.