Globalisation

Exchange rates: When the Australian dollar appreciates, this makes exports dearer and imports cheaper and vive-versa if the currency depreciates.

Each

of these factors will be discussed in further detail throughout.this study guide as appropriate to each

topic and chapter.

International competitiveness

International competitiveness refers to the ability of a country to design, produce, and market goods and services that are better or cheaper than those of other countries. Globalisation has weakened traditional barriers to international trade, and virtually integrated the world's economies into one giant free market. This means that the achievement and maintenance of international competitiveness for countries has come to determine the difference between success and failure in national economic performance.

Why do Nations Compete?

Countries compete to increase their standard ofliving. The most widely used indicator of a country's standard of living is a country's per capita Gross Domestic Product (GDP), sometimes adjusted to Purchasing Power Parity (PPP). PPP conversion factors take into account differences in the relative prices of goods and services- particularly non-tradables therefore providing a better overall measure of the real value of output produced by an economy compared to other economies. Unfortunately, GDP does not include many factors that people generally value as part of their standard ofliving e.g. negative externalities such as climate change and environmental considerations; security, education, health and happiness. The OECDs definition of a nation's competitiveness is "the degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long term" . A country's competitiveness and openness to global business activity are strongly linked to a country's standard of...