F
o
i
e
r
n
g
I
h
I
✗
a
n
e
g
Main Reasons
Demand :
People have different tastes
Impossible for every country
Not easy
supply
be
to
self sufficient
a
the factors of
countries don't have all resources
some
a
low
standard of
living
production
required
to
technology
in
countries don't have the latest
Germany
:
to
want to consume
produce a large range of goods and services
from South Africa because it doesn't have a suitable climate for growing grapes
Uk imports wine
:
Differences
ex
could lead
country
Citium
:
Uneven distribution of
ex
high quality product IN
to produce at a
,
Japan $ United States
but Malawi
technology
are able to
a textile worker has to use
use
capital that embodies a high
Old to ✗ till machine to
an
make
level of
technology
clothes
Different production techniques
Capital
ex
:
or labour
Production of
Agricultural
ex
:
United
intensive
electronic
can be
industry
States
product requires
capital
agricultural
or
a lot
of capital and skilled labour
labour intensive
output is capital intensive but in Asia capital is
scarce so
they
are
more labour
intensive
Absolute and comparative advantage
Absolute
advantage
When
:
a
country is able
to
produce
more
of a
good
with the same
set of resources to another
country
lomparitive advantage
Each country specialises
that it wants
:
in
A country is relatively
more
producing
that it can produce most efficiently and then trades its surplus for the output
the output
efficient in producing the
good compared
to another
to consume
EX : South Africa has
a
comparative advantage in the minerals and agricultural products
country
Differences
in climate
Countries have different
Ex : South Africa specialises
and
climates
in
to
are therefore able
sugar lane and European
countries
produce different products
produce
sugar beet
Effects of international trade
Increased production
Increased employment
Greater variety of goods
available
specialisation
May
result in
negative
effects
Balance of payments
'
statement Of
ZAR
:
all transactions
undertaken
by
the little N
Of a country with people and institutions in the rest of the world
Foreign exchange
South African Randi
>
Current account
>
Record transactions for
Trade
in
When
When
goods
country exports good
a
primary income flows and
,
,
foreigners
demand the
Value of exported
:
goods
that
gold
currency and
local
,
Countries import
current
transfers
sell their
currency and buy
value of
exports
sell their own
.
the
foreign currency
imported goods
:
and export
goods
and services
income flow
Payments
'
and services
country imports goods the people of that country
a
in services
primary
goods
to the currency of Other countries
:
trade balance
trades
the trade in
Refers
in respect of Introit and dividends made between titians and firms in different countries
British liiilen
owns shares in a South African
company
.
They
relieves dividends and Introit
current transfers
Transfer payments
A transfer
>
'
Income
such as
pensions
or
grants
of income from one economic
tax collected
by
the
agent
government is used
A South African pensioner
will continue
to another
to finance
to relieve
the
their
payment
money
of pensions
in a
foreign country
Capital transfer account
>
1h0m
the amount Of
money moving
A South Afnan emigrates
>
into and Out of the
country
Australia then continues with
to
as a result of
the assets
,
people telling
they're sold house
,
Sharat
,
assets
bonds
will appear as an outflow
in the capital transfer account
Financial account
>
The
value of direct investment
,
portfolio and hot money into and
out of the
country
Not Direct Investment
Inflows of money Used
>
Barclays
to
finance
the
purchase of
bank British company
buys
resources in
a substantial
or to
companies
set Up now 0h01
1ham in ABSA
portfolio investment flows
The
NON OF money to another country Where the money it used to buy shares in companies
.
>
Not
When a British Citi 10h
buys
other investment
hot money flows
The flow of Money into
>
If
shares in
a South
African
company
,
or a
and out of countries as investors seek to get the
intro rates are
relatively high
in south Africa
compared
to U1A
south African
highest
,
A
change
in the
value of the
gold
and
foreign exchange
Unrecorded transactions
>
Transactions
not
recorded in the balance of payments
Administrative
Illegal
activities
errors
buys
shares in an Australian
company
rata of return
money flows from the United
Change in reserves
>
little n
held by the antral bank
States to banks in South Africa