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Trade in the Contemporary World

Merchandise, services and capital flows

  • 3 things to know
  • Component 02

Overview

Recall questions on merchandise, services and capital as components of trade, visible and invisible trade, foreign direct and portfolio investment, remittances, the balance of trade with a worked deficit calculation, services surpluses, and the terms of trade.

What you need to know

Answer each one before you reveal it.

Your recallNot started
Key term

What is meant by merchandise trade?

Key term

Define the term services in the context of international trade.

Key term

What does capital refer to as a component of international trade?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What is meant by merchandise trade?

    Model answer

    Merchandise trade is the international exchange of tangible, physical goods such as food, fuels, raw materials and manufactured products.

  2. 2

    Define the term services in the context of international trade.

    Model answer

    Services are intangible products sold across borders, such as banking, insurance, tourism, transport, education and information technology work.

  3. 3

    What does capital refer to as a component of international trade?

    Model answer

    Capital refers to flows of money between countries, including foreign direct investment, portfolio investment, bank loans, aid and remittances.

  4. 4

    Why are service exports harder to measure than merchandise exports?

    Model answer

    Services are intangible and cross borders without passing through customs, so they are never physically counted and have to be estimated from company accounts and balance of payments records.

  5. 5

    Distinguish between visible and invisible trade.

    Model answer

    Visible trade is trade in physical goods, while invisible trade is trade in services and other intangible earnings such as interest and profits.

  6. 6

    What is foreign direct investment?

    Model answer

    Foreign direct investment is when a firm based in one country buys, builds or takes a lasting controlling stake in a business or asset in another country.

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AThe lower quartile is the 2nd value, 11 cm.
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Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.

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