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RI 2019 Q6
b) Discuss the impact of a country's openness on its…
RI 2019 Q6
b) Discuss the impact of a country's openness on its consumers, producers and employees. [15]
KW:
- discuss: 2 POV
- openess: removal of BTE across countries
- impact on crs, prs and employees is measured (employees ARE NOT THE SAME AS PRS)
- for employees we relate it to wages
- producers relate to profit
- think about the question in terms of g+s, capital and labour
intro
- define openness
- give overview of what is going to be in the essay
body
openess to trade flows on crs prs and employees
- for eg, Malaysia now removes tariff on imported cars to allow for greater trade flows
- draw tariff diagram
crs:
- lower price of cars
- increased qty and variety of imported cars to choose from
- cr surplus increases
prs:
- face larger competition
- lower prices of cars
- total revenue falls (show on tariff diagram)
- total profit falls
- producer surplus falls
employees:
- fall in dd for their labour
- stepping down pdtion of cars in Msia
- cyclical unnmt
- wages of employees may fall
EV:
- structural unnmt occurs too
- globalisation
- higher chances of dumping to occur
- workers do not have the skills to move to another job
- eg Europoean countries have accused china of dumping solar panels into their country
openess to capital flows on crs prs and employees
- means that the inflow and outflow of foreign direct investments (FDI) are lowered or removed
- explain that there will be AEG
crs:
- increase income
- increase purchasing power
- increase in qly of g+s
- increase in non-material SOL
- price stability
- increase ability to predict changes to pxes of g+s
employees:
- increase in dd for labour due to investments by firms
- cyclical unnmt falls
- wages potentially increase
prs:
- increase in competition for their market share
- supernormal profits eroded away
- eg Gojek and Uber entering the mkt in sg to compete with Grab
- draw graph with a fall in AR --> bringing in a micro concept
- BUT increase in openess also means that local prs can expand to overseas
- increase mkt share and presence in other countries
- earn more profit
openness to labour flows on crs prs and employees:
- due to differences in wages
- flow of labour from different countries
- increase ss of labour
- shift Yf outwards
- PEG
- lower wage rate
- decrease COP
- sras increase
- AEG
crs:
- benefit from the lower COP
-
employees:
- lower wages
- structural unnmt when they do not want a low wage job, but at the same time they do not have the skills to move to another job
conclusion
Type of economy
- generally for small and open economies like sg, it is important that we are open because we are heavlity reliant on trade
- closed economies are better able to rely on protectionist measures
Policies to mitigate negative impacts
- there are numerous negative impacts
- to minimise the unnmt, the govt can use SSP to upskill the workers