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Factors contributing to globalisation.
Understand the significance of the factors that have enhanced the interdependence
of economies, e.g. the reduction in trade barriers, capital mobility,
the growth of MNCs and technological developments, e.g. the Internet.
International exchange.
Understand the importance of trade between developed economies, relative
to world trade as a whole.
Trade liberalisation and protectionism.
Reasons for tariffs, quotas and non tariff barriers and the consequences
of their use.
Explain the global efforts to reduce tariff barriers and analyse the impact
of protectionist measures on resource use in an international context,
e.g. the impact of the CAP on world trade in commodities.
Sources of possible conflict between trading blocs and the role of the
World Trade Organisation (WTO).
Explain how membership of the WTO constrains the use of protectionist
policies by countries particularly in times of global recession.
The Balance of Payments.
Understand the main elements of the current account. Only a brief knowledge
of capital transactions is required.
Understand recent trends in the UK's accounts (links with unit 3).
International competitiveness.
Understand various measures of the competitive position of the leading
countries in international trade, e.g. unit costs and relative export
prices.
The UK's changing international competitive situation.
Make an appraisal of the competitiveness of British industry in both home
and overseas markets.
Explain the UK's export performance and import penetration.
Factors affecting international competitiveness and government policies
to enhance the UK's relative position.
Understand how successive UK governments have taken measures to enhance
competitiveness, e.g. through deregulation measures, encouragement of
inward investment and the enhancement of labour skills.
Balance of payments disequilibrium.
Policy remedies including:
" Exchange rate adjustment
" demand management
" supply side policies.
Evaluate the impact of these three alternative policy measures (links
with unit 3).
Exchange rate systems.
Fixed and floating rates.
Explain how exchange rates are determined under a system of floating rates
(links with unit 1).
Factors affecting exchange rates.
Understand influences on exchange rates such as relative interest rates,
relative inflation rates and speculative capital flows.
Exchange rates as a policy instrument.
Explain the effects of changes in exchange rates on the level of economic
activity in different countries.
European Monetary Union.
The costs and benefits of monetary union in the EU.
Evaluate the implications of monetary union for the conduct of monetary
and fiscal policies by individual countries in Europe.
Inward foreign investment by MNCs.
Analyse the role, benefits and disadvantages of capital inflows from MNCs
in an EU context.
External shocks to the global economy.
Examine adverse impacts on the world level of economic activity, e.g.
higher oil prices.
Public expenditure and taxation.
Explain reasons for the changing size and composition of public expenditure
in the UK.
Different types of taxes.
The impact of public expenditure and taxation on income distribution.
Evaluate the relative merits of direct and indirect taxation and examine
the effects of changes in fiscal policy for different groups in the UK.
Public sector borrowing.
Explain the factors influencing the size of public sector borrowing.
International comparisons of public finances.
Explain and evaluate the implications of differences between countries
in their public finances.
The working of fiscal, monetary and supply side policies.
Appraise policy instruments in achieving policy objectives and evaluate
associated problems that may be encountered, e.g. time lags; the accuracy
of economic data on the state of the economy.
Conflicts between these objectives.
Explain possible trade-offs between inflation and unemployment with the
application of the simple Phillips curve. Other possible conflicts should
also be considered, e.g. between economic growth and Balance of Payments
equilibrium.
Unemployment and inflation in an EU and global context.
Understand the causes and consequences a global context. trends in the
numbers out of work and the rate of increase in the price level within
the EU (links with unit 3).
The relationship between real output and the non-accelerating inflation
rate of unemployment (NAIRU).
Understand the distinction between the short run Phillips curve and the
long run Phillips curve.