6.3

Free trade and protection

10 flashcards to master Free trade and protection

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Definition Flip

Define free trade and explain its potential benefits.

Answer Flip

Free trade is international trade without government restrictions like tariffs or quotas. Benefits include lower prices for consumers, increased choice, and access to a wider range of goods and services.

Example: consumers can access cheaper electronics from overseas.
Definition Flip

What is protectionism, and why might a government adopt protectionist policies?

Answer Flip

Protectionism involves government actions to restrict international trade, such as tariffs or quotas. Governments might adopt protectionist policies to protect domestic industries, create jobs, or improve national security.

Example: a country might impose tariffs on imported steel to protect its domestic steel industry.
Definition Flip

Explain what a tariff is and how it impacts consumers and producers.

Answer Flip

A tariff is a tax on imported goods. It increases the price of imports, making them less competitive with domestic goods. Consumers pay higher prices, while domestic producers benefit from reduced competition.

Example: a tariff on imported cars would make domestic cars more attractive to consumers.
Definition Flip

Define quota and provide an example of how it functions.

Answer Flip

A quota is a limit on the quantity of a good that can be imported. This restricts the supply of the imported good, raising its price.

Example: a country might impose a quota on imported sugar, limiting the amount of foreign sugar available in the domestic market.
Definition Flip

What is a subsidy, and how does it potentially distort international trade?

Answer Flip

A subsidy is a government payment to domestic producers. This lowers their production costs, making them more competitive both domestically and internationally. It can distort trade by giving domestic producers an unfair advantage over foreign producers.

Example: a government might subsidize its agricultural sector.
Definition Flip

Describe an embargo and provide a real-world example.

Answer Flip

An embargo is a complete ban on trade with a specific country or on specific goods. It's often used as a political tool.

Example: the US embargo on Cuba restricts trade and financial transactions with the country.
Key Concept Flip

Explain the concept of a trade barrier. Give examples of different types of trade barriers.

Answer Flip

A trade barrier is any government policy that restricts international trade. Examples include tariffs, quotas, subsidies, embargoes, and regulatory barriers (

Example: strict safety standards). These barriers can increase the cost or difficulty of importing goods.
Definition Flip

Outline the main aims of the World Trade Organization (WTO).

Answer Flip

The WTO aims to promote free trade by reducing trade barriers and providing a forum for resolving trade disputes between countries. It seeks to create a level playing field for international trade, fostering economic growth and development. The WTO helps enforce international trade rules.

Key Concept Flip

Define a trading bloc and explain potential benefits and drawbacks for member countries.

Answer Flip

A trading bloc is a group of countries that have agreed to reduce or eliminate trade barriers among themselves. Benefits include increased trade, economies of scale, and stronger economic growth. Drawbacks can include loss of sovereignty and potential trade diversion from non-member countries.

Example: the EU is a trading bloc.
Key Concept Flip

Explain how a tariff impacts government revenue.

Answer Flip

A tariff generates revenue for the government imposing it. The revenue is equal to the tariff rate multiplied by the quantity of goods imported after the tariff is implemented. Higher tariffs typically lead to more revenue, up to a point, after which imports may decrease significantly.

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6.2 Globalisation and multinational companies 6.4 Foreign exchange rates

Key Questions: Free trade and protection

Define free trade and explain its potential benefits.

Free trade is international trade without government restrictions like tariffs or quotas. Benefits include lower prices for consumers, increased choice, and access to a wider range of goods and services.

Example: consumers can access cheaper electronics from overseas.
What is protectionism, and why might a government adopt protectionist policies?

Protectionism involves government actions to restrict international trade, such as tariffs or quotas. Governments might adopt protectionist policies to protect domestic industries, create jobs, or improve national security.

Example: a country might impose tariffs on imported steel to protect its domestic steel industry.
Explain what a tariff is and how it impacts consumers and producers.

A tariff is a tax on imported goods. It increases the price of imports, making them less competitive with domestic goods. Consumers pay higher prices, while domestic producers benefit from reduced competition.

Example: a tariff on imported cars would make domestic cars more attractive to consumers.
Define quota and provide an example of how it functions.

A quota is a limit on the quantity of a good that can be imported. This restricts the supply of the imported good, raising its price.

Example: a country might impose a quota on imported sugar, limiting the amount of foreign sugar available in the domestic market.
What is a subsidy, and how does it potentially distort international trade?

A subsidy is a government payment to domestic producers. This lowers their production costs, making them more competitive both domestically and internationally. It can distort trade by giving domestic producers an unfair advantage over foreign producers.

Example: a government might subsidize its agricultural sector.

About Free trade and protection (6.3)

These 10 flashcards cover everything you need to know about Free trade and protection for your Cambridge IGCSE Economics (0455) exam. Each card is designed based on the official syllabus requirements.

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