1. The government chooses a target rate for the currency.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

2. The government accepts the market value of the currency.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

3. Supply and demand on the currency market affect the exchange rate.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

4. The government does not attempt to change the rate.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

5. The government needs reserves of foreign currency.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

6. There are advantages and disadvantages.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

International trade

There are plenty of incentives for a country to have an open economy. Exports increase the size of the market for producers. Imports stimulate competition in local markets and provide a wider choice for consumers. These are good reasons for international trade. However, another important reason for trading is to exploit advantages. Economists talk about two types of advantage that an economy can have over others: absolute advantage and comparative advantage.

An economy has absolute advantage when it can produce goods at a lower cost than other economies can, or they have resources that others don't have. For example, warm Mediterranean countries have an absolute advantage in the production of olive oil. Many countries in Asia have an absolute advantage in manufacturing electronic goods. Clearly, it makes sense for countries with absolute advantages to trade with each other.

The second kind of advantage is comparative advantage. This happens when an economy can produce something at a lower opportunity cost than other economies can. Remember that the opportunity cost of something is what you have to give up in order to have it. For example, imagine that country A makes two things with its resources: clothes and furniture. If it wants to increase production of clothes, it must decrease its production of furniture. This loss is the opportunity cost.

Now imagine that country B also makes clothes and furniture, but it makes less of both than country A. In other words, country A has an absolute advantage over country B in clothes and furniture. However, country B can increase its production of clothes with only a small opportunity cost in furniture. This means that country B has a comparative advantage over country A in the production of clothes.

But why would country A want to trade with country B? What benefit would they gain? In fact, both countries can benefit by specialising. If country A produces only furniture, and country B produces only clothes, both countries will be making best use of their available resources. By trading in this way, production of both products increases. In turn, this increases the economic welfare of both countries.

Despite all the advantages of having an open economy, countries sometimes restrict trade with other countries. For example, governments may charge tariffs on imports. These are taxes which make imports more expensive than locally produced products. Governments may also restrict the amount of imports entering the country. This kind of restriction is called an import quota. Since international trade has so many benefits, why would countries want to restrict trade in this way? There must be some very good reasons!

Переведите на английский язык:

1.    Валютный курс может воздействовать на экономику в целом: на процентные ставки, платёжный баланс и экономический рост.

2.    При свободном плавании валюты правительство не регулирует её курс, а цену валюты определяет рынок.

3.    Когда правительство хочет, чтобы национальная валюта изменялась вместе с другой валютой, например, долларом или евро, оно привязывает свою валюту к ней.

4.    Если правительство хочет поддержать курс своей национальной валюты, оно вынуждено продавать или покупать её и другие валюты на международном валютном рынке.

5. Любая страна имеет абсолютные и сравнительные преимущества. Если страна может производить товары с более низкими издержками, чем другие страны, или имеет ресурсы, которых нет у других стран, то страна обладает абсолютными преимуществами.

6.    Страна имеет сравнительные преимущества, когда может производить что-либо при более низких издержках упущенных возможностей, чем другие страны.

7.    В некоторых случаях страны вынуждены вводить ограничения на торговлю с другими странами. Например, правительство может повышать тарифы на импорт или вводить импортные квоты.

International trade

1. Complete each sentence with a word from the box.

comparative exploit   incentive

quota  restrict specialises  stimulate tariffs

1. All countries try to … the natural resources that they have.

2. … are a kind of tax that the government puts on imported goods.

3. Low interest rates can help to … the economy and make it grow.

4. Arise m salary is an … to make people work harder.

5. The UK economy … in services such as banking and insurance.

6. Governments sometimes need to … the flow of imports and exports.

7. The opposite of absolute is … .

8. They have a … which must be fulfilled if they want to keep the contract.