International Trade Boosting Growth

• What is meant by standard of living?

  A measure of economic welfare and well-being.
• What are the factors affecting standard of living?

  • Access to good healthcare
  • Access to good education
  • Quality of housing
  • Life satisfaction
  • Personal freedom
• What is meant by subjective happiness?

  Refers to ‘self-reported’ levels of happiness with one’s life, usually determined using questionnaires which consider emotions, rather than asking about material well-being.
• What are the limitations of using GDP to compare living standards?

  -> Does not take into account many other factors that influence the standard of living.

  • The distribution of income
  • The value of unpaid work
  • Environmental degradation
  • Impact of technological improvements
• What is the human development index?

  -> Indicator of economic development and broader measure of the standards of living.

  It looks at:

  • Health-life expectancy at birth
  • Education - mean years of schooling of adults
  • Living standards - GNI per capita
• What are the demand-side factors causing economic growth?

  • lower interest rates
  • lower taxes e.g. income tax
  • weak pound
  • lower inflation
  • higher animal spirits
  • higher wages
• What are the supply-side factors that cause economic growth?

  • war - acquisition of land
  • increased investment in capital - higher quantity of capital
  • lower infant mortality rate
  • increased spending on education
  • better standard of living
  • discover raw materials
  • increase in labour force
  • higher labour productivity
• What are the pro of export led growth?

  • Exports of goods and services are an injection into the circular flow of income leading to a rise in aggregate demand and an expansion of output.
  • Growing export sales provide revenues and profits for businesses which can then feed through to an increase in capital investment spending.
  • Many industries help facilitate trade such as trade insurance, logistics and port facilities.
  • Countries with fast-growing export sectors are likely to see increased investment and employment in these related industries.
• What are the cons of export led growth?

  • Focusing on exporting might lead to over-dependence on the economic cycles or trade partner countries and vulnerability to external economic & political shocks.
  • Running persistent trade surpluses might incite a protectionist response from other nations who feel the benefits of trade have been unequally skewed in favour of exporting countries.
  • Production capacity allocated to supply goods & services for export cannot be put to use meeting domestic needs and wants.
  • Rapid export led growth might lead to demand-pull inflation and higher interest rates.