Land and infrastructures
– Land and infrastructures is the physical land where the production takes place. The infrastructure is improvements on the land that ensures the production process is swift. Examples include the roads that are constructed to ensure production is successful.
– Natural resources include all resources found in the land that helps in the production process. Natural resources may include coal that is used to give energy.
– Capital is the financial resource that ensures it is possible to purchase equipment used in the production process. Capital may include finances available to buy a lorry to ferry raw materials to the production plant.
– Labor force and education level provide human resources. Labor ensures all processes are running efficiently with no hiccups. Individual skills are essential in the production process. for example, an engineer will ensure the machines are running efficiently.
– Government policies guard how the production process takes place. For example, tariffs discourage imports, and local industries have the power to produce more
Question 2
Comparative advantage theory refers to when a producer can more goods and give more service at a low opportunity cost compared to other rival producers. For example, suppose the US can produce a Toyota Model A at $1 million, and rival producer countries like China can produce the same model at $1.2. In that case, the US will have a comparative advantage.
Question 3
- The gold was used to value all other commodities until the Bretton Wood system, which established the International Monetary Fund and World Bank and selected the US dollar as the global value that would be used to value other currencies and help in the exchange process. US was given the sole responsibility of printing the USD.
- The Triffin dilemma leads to trade deficit because if foreign countries want to hold the reserve currency, they are obligated to supply more currency to satisfy the demand.
Question 4
– Countries with the reserve currency can dictate the world trade and benefit more from foreign exchange
– Such a country will not have violent currency fluctuation because disruption may have severe global economic effects.
– Fast growth of the local economy
– The government incurs less cost for external borrowings.
– The assets demand and development is high .