Summary

The UK is trading increasingly with Europe and decreasingly with the USA

There is an increased role of trade with developing economies by the UK

A country has a comparative advantage in the production of those goods which it produces more efficiently than other goods

International trade allows efficient allocation of resources International trade can result in countries becoming too reliant on a few protects

Protectionism is where the government tries to protect certain industries from international trade using a number of policies including tariffs

The balance of payments account is made up of the current and capital accounts

Exchange rates can be determined by market forces (floating exchange rates) or by the government (fixed exchange rates)

European Monetary Union (EMU) refers to the adoption of a single currency in the EU

There are advantages and disadvantages of the UK joining the Euro – the largest disadvantage is that they will lose power to set their own interest rates