Chapter 10 Flashcards
Globalisation
The process of growing economic integration of the world’s economies
WTO (World Trade Organisation)
International body whose purpose is to promote free trade by persuading countries to abolish import tariffs and other barriers to trade
MNCs (multinational corporations)
Enterprises operating in several countries but with their headquarters in one country
Less developed countries
Countries considered behind in terms of their economy, human capital, infrastructure and industrial base
More developed countries
Countries with a high degree of economic development, high average income per head and high standards of living.
EU (European Union)
Economic union established in 1993 wanting to include numerous central and Eastern European nations
Comparative advantage
Measured in terms of opportunity cost. The country with the least opportunity cost when producing a good possesses a comparative advantage in that good
Quotas
Physical limits on the quantities of imported goods allowed into a country
Tariffs
Taxes imposed on imports from other countries entering a country
Export subsidies
Money given to domestic firms by the government o encourage firms to sell their products abroad and to help make their goods cheaper in export markets
Eurozone
The group of EU countries that have replaced their national currencies with the euro
Free trade area
Member of countries abolish tariffs on mutual trade, but each partner determines its own tariffs on trade with non-member countries
Customs union
A trading bloc in which member countries enjoy internal free trade in goods and possible services, with all the member countries protected by a common external tariff barrier
SEM (Single European Market)
The SEM was intended to establish the four freedoms- free movement of goods, services, workers and capital between the EU members of states
Current account
Measures all the currency flows into and out of a country in a particular time period in payment for exports and imports of goods and services, together with primary and secondary income flows
Balance of payments
The record of all money flows or transactions between the residents of a country and the rest of the world in a particular period
Trade in goods
Exports and imports of visible or tangible items
Trade in services
Exports and imports of services such as financial services, tourism and shipping
Primary income flows
INWARD primary income flows comprise income flowing into the economy in the current year, which is generated by UK-owned capital assets located overseas
OUTWARD primary income flows comprise income flowing out of the economy in the current year, which is generated by overseas-owned capital assets located in the UK
Secondary income flows
Current transfers, such as gifts of money, international aid and transfers between the UK and EU, flowing into or out of the UK economy in a particular year
Financial account
Part of the BofP which records capital flows into and out of the economy
FDI (Foreign Direct Investment)
Investment in capital assets (such as manufacturing and service industry capacity, in a foreign country by a business with headquarters in another country
Portfolio investment
The purchase of one country’s securities, e.g. bonds and shares, by the residents or financial institutions of another country
Expenditure-reducing policy
A government policy which aims to eliminate a current account deficit by reducing the demand for imports by reducing the level of aggregate demand in the economy
Expenditure-switching policy
A government policy which aims to eliminate a current account deficit by switching domestic demand away from imports to domestically produced goods
Exchange rate
The external price of a currency, usually measured against another currency
Freely floating exchange rate
The exchange rate is determined solely by the interplay of demand for, and supply of, the currency
Fixed exchange rate
An exchange rate fixed at a certain level by the country’s central bank and maintained by the central bank’s intervention in the foreign exchange market
Currency union
An agreement between a group of countries to share a common currency, usually to have a single monetary and foreign exchange rate policy
Indicators of development
Include GDP per head, information on the distribution of income, mortality rates and health statistics
United Nations Human Development Index
Index based on life expectancy, education and per capita income indicators, which ranks the world’s countries into four tiers of human development.
- very high human development
- high human development
- medium human development
- low human development
Education and training
Education and develops individual knowledge and intellect, while training develops work skills
Corruption
A barrier holding back economic growth and development, especially in less developed economies
Institutional factors
Examples of institutional factors include rules, laws, constitutions, the financial system and defined property rights
Infrastructure
The result of past investment in fixed capital goods that are needed for the economy to operate efficiently
Human capital
Accumulated stock of skills and knowledge, relevant to work, embodied in human beings
Aid
Money, goods and services and ‘soft’ loans given by the government to help another country
