RSM100H1 Lecture Notes - Lecture 8: European Debt Crisis, European Central Bank, Maple Syrup
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RSM100H1 Full Course Notes
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Global and international: global: you produce locally what you sell locally. Why nations trade: a nation can"t produce something that it wants to consume, some countries have absolute (e. g. canada and maple syrup) or comparative advantages, bringing coal to newcastle : comparative advantage. Risks associated with international trade: political instability, exchange rate instability (hedging agreements, barter system can help protect you from this) Why companies trade: excess resources/capacity, cost reduction, particular foreign market demand (e. g. champagne comes from champagne, france) Free trade: results in lower prices and greater choices. European debt crisis (exam question: unified currency controlled by european central bank. Earnings are reduced so less taxes are collected: germany is very financially responsible (few state benefits). Greece is not (lots of state benefits, low taxes paid): a fiscal union is needed to balance monetary union (or neither). However, there were many barriers to trade (e. g. different currencies, tariffs). So free trade zone and euro was established: how germany benefitted:
