4.1 A2 Business key terms

Question 1

economic growth

Answer 1

increase in a country’s productive capacity

Question 2

emerging economies

Answer 2

economies of developing countries where there is rapid growth, but also significant risk

Question 3

human development index (HDI)

Answer 3

collection/mix of statistics that includes: 1) life expectancy 2) standard of living (GDP per capita) 3) literacy rate
ranking countries according to their human development

Question 4

literacy rate

Answer 4

percentage of adults (over the age of 15) that can read and write

Question 5

purchasing power parity (PPP)

Answer 5

a measure that uses the price of purchasing a standardised basket of goods and services in order to compare prices across economies
gives a more realistic comparison of GDP

Question 6

gross domestic product (GDP)

Answer 6

the total value of output (goods and services) produced in a particular time period
used to measure economic activity

Question 7

gross domestic product (GDP) per capita

Answer 7

total value of output (goods and services) produced in a given time period (year) divided by the number of people in the population

Question 8

comparative advantage

Answer 8

the theory that a country should specialise in products and services that it can produce more efficiently than other countries
e.g. (coffee from Brazil or tea from China)

Question 9

competitive advantage

Answer 9

an advantage a business has over its competitors gained by specialisation (research, product development, management) - or by offering consumers greater value - either by lowering prices or providing benefits, services and quality that justifies the high prices

Question 10

devision of labour

Answer 10

when production is broken down into many separate tasks, and each task is done by specialised workers
by each worker focusing on a particular operation, this leads to an increase in output

Question 11

imports

Answer 11

foreign goods and services bought byresidents of a country

apples from Mexico purchased by UK consumers in a UK based supermarket

Question 12

exports

Answer 12

goods and services produced in one countryand purchased by residents of another country
(Chinese steel sent to the UK by Chinese companies)

Question 13

foreign direct investment

Answer 13

an investment made by a firm or individual in one country into business interests located in another country
FDI takes place when an investor establishes foreign business operations (factories) or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company (global mergers)

Question 14

international trade

Answer 14

exporting (selling abroad) and importing (buying from abroad)

Question 15

specialisation

Answer 15

when each individual employee focuses on a given task

leading to an increase in output

Question 16

import tariffs

Answer 16

taxes that are imposed on imports - increasing the cost of traded goods
it is a form of protectionism

Question 17

globalisation

Answer 17

growing integration and interdependence of the world’s economies

Question 18

transnational or multinational companies

TNCs) / (MNCs

Answer 18

companies that own or control production or services facilities outside the country they are based in
note: it’s more about having business operations and activities in more than one country rather than selling goods

Question 19

world trade organisation (WTO)

Answer 19

an international organisation that promotes free trade by persuading countries to abolish protectionism barriers (e.g. tariffs, embargoes, import quotas etc)
it polices free trade agreements, settles trade disputes between governments and organises trade negotiations

Question 20

administrative barriers

Answer 20

rules and regulations that make it difficult for importers to penetrate an overseas market

Question 21

dumping

Answer 21

when a firm in one country exports a product to another country at a price below the price it charges in its home market or below the costs of supply

Question 22

embargo

Answer 22

a complete ban on international trade

usually for political reasons

Question 23

import quota

Answer 23

a physical limit on the quantity of imports allowed in a country

Question 24

infant industries

Answer 24

new industries that have yet to establish themselves

Question 25

protectionism

Answer 25

any attempt by a government, trade bloc or region to impose restrictions on the import of goods and services and protect domestic producers

Question 26

subsidy

Answer 26

financial support from government given to a domestic producer to help compete with overseas firms
these include: - grants
- interest free loans
- tax breaks
this leads to a decrease in costs, increase in supply

Question 27

trade barriers

Answer 27

inclusion of all costs present when getting a good to the final consumer - excluding production costs

• transport costs
• import tariffs

Question 28

common market

Answer 28

a market where goods, labour and capital can move freely across the member states; trade barriers usually eliminated - or at least reduced

Question 29

customs union

Answer 29

a union where member states remove all trade barriers between themselves and members adopt a common set of barriers against non members

Question 30

economic union

Answer 30

a type of trade bloc involving both a customs union and a common market

Question 31

monetary union

Answer 31

an economic union that uses a common currency

Question 32

trading bloc

Answer 32

a group of countries that have signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves

Question 33

free trade area (FTA)

Answer 33

a region where member states remove all trade barriers between themselves, but each member state keeps different barriers against non members
- NAFTA (North American Free Trade Area) is an example

Question 34

preferential trading area (PTA)

Answer 34

a type of trading bloc where certain type of products from participating countries receive a reduced import tariff rate

Question 35

regional trade agreement (RTA)

Answer 35

agreement made between two or more countries within a geographical region, which is designed to facilitate trade by bringing down barriers

Question 36

rules of origin

Answer 36

a system of allocating certificates whereby a defined amount of a product or service must be certified as being created within that region

Question 37

single market

Answer 37

a market where almost all trade barriers between members have been removed and common laws or policies aim to make the movement of goods and services, labour and capital between the members easy