4.1 Globalisation: Glossary

Question 1

Economic growth

Answer 1

An increase in a country’s productive capacity

Question 2

Emerging economies

Answer 2

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

Question 3

GDP

Answer 3

The value of all the finished goods and services produced within a country’s borders in a specific time period.

Question 4

Human Development Index (HDI)

Answer 4

A measure of economic development which is comprised of three equally weighted index numbers, including health, education and GDP per capita (adjusted for exchange rate differences and inflation).

Question 5

Comparative advantage

Answer 5

The theory that a country should specialise in products and services that it can produce more efficiently than other countries

Question 6

Competitive advantage

Answer 6

The idea that a business should specialise in any area (products, services, management, research etc.) where it can perform better than its competitors

Question 7

Division of labour

Answer 7

Different workers specialising in different productive activities

Question 8

Exports

Answer 8

Goods or services that a firm produces in its home market, but sells in a foreign market

Question 9

Foreign direct investment

Answer 9

Investing by setting up operations or buying assets in businesses in another country

Question 10

Imports

Answer 10

Goods and services that are bought into one country from another

Question 11

International trade

Answer 11

Exporting and importing

Question 12

Specialisation

Answer 12

A production strategy where a business focuses on a limited scope of products or services. This results in greater efficiency, allowing for goods and services to be produced at a lower cost per unit

Question 13

Tariffs

Answer 13

Taxes that are imposed on imports

Question 14

Foreign Direct Investment (FDI)

Answer 14

Business investment undertaken by a firm in another country e.g. building a factory

Question 15

Globalisation

Answer 15

The growing integration of the world’s economies

Question 16

Transnational companies / multinational companies

Answer 16

Companies that own or control production or service facilities outside the country in which they are based

Question 17

World Trade Organisation (WTO)

Answer 17

An international organisation that promotes free trade by persuading countries to abolish tariffs and other barriers. It polices free trade agreements, settles trade disputes between governments and organises trade negotiations

Question 18

Administrative barriers

Answer 18

Rules and regulations (such as trading standards and strict specifications) that make it difficult for importers to penetrate an overseas market

Question 19

Embargo

Answer 19

A complete ban on international trade - usually for political reasons

Question 20

Import quota

Answer 20

A physical limit on the quantity of imports allowed into a country

Question 21

Infant industries

Answer 21

New industries that have yet to establish themselves

Question 22

Protectionism

Answer 22

An approach used by government to protect domestic producers

Question 23

Subsidy

Answer 23

Financial support given to a domestic producer to help compete with overseas firms

Question 24

Tariffs / custom duties

Answer 24

A tax on imports to make them more expensive

Question 25

Trade barriers

Answer 25

Measures designed to restrict trade

Question 26

Common market

Answer 26

A market where goods, labour and capital can move freely across the member states; tariffs are generally removed and non-tariff barriers eliminated, or at least reduced

Question 27

Customs union

Answer 27

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

Question 28

Economic union

Answer 28

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

Question 29

Free Trade Area (FTA)

Answer 29

A region where member states remove all trade barriers between themselves, but each member state nevertheless keeps different barriers against non-member states

Question 30

Preferential Trade Area (PTA)

Answer 30

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

Question 31

Regional Trade Agreement (RTA)

Answer 31

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

Question 32

Rules of origin

Answer 32

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

Question 33

Single market

Answer 33

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 countries as easy as the movement within each country

Question 34

Trading bloc

Answer 34

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