Definitions

Question 1

appreciation

Answer 1

increase in the value of an asset (e.g. currency, real estate)

Question 2

depreciation

Answer 2

decrease in the value of an asset (e.g. currency, real estate)

Question 3

exchange rate

Answer 3

the value of one currency in another currency

Question 4

foreign direct investment (FDI)

Answer 4

refers to the investment made by a company or individual from one country in another country

Question 5

dumping

Answer 5

when a country exports products at a price lower than the production market value of the country of origin

Question 6

quotas

Answer 6

restrictions set by the government on the quantity of imported goods

Question 7

subsidy

Answer 7

financial aid provided by the government to domestic firms in order for them to be able to compete with foreign products

Question 8

tariffs

Answer 8

when government imposes tax on imported goods

Question 9

balance of payments (BOP)

Answer 9

record of all economic transactions between the resident of the country and resident of all other countries

Question 10

current account

Answer 10

sum of trade balance, balance of income and balnce of current transfers (exported & imported goods, donation/aid/gift, rent, wage, interest)

Question 11

capital account

Answer 11

composed inflows minus outflow of capital transfer & transactions in non-produced, non-financial assets (e.g. land, water, patent, copyright)

Question 12

financial account

Answer 12

inflow minus outflow of funds for direct investment and portfolio investment

Question 13

trade balance/BOT

Answer 13

inflow and outflow of all visible and invisible exports and imports

Question 14

trade war

Answer 14

refers to a conflict between two or more countries due to each country imposing trade barriers on the other country’s exports (which can lead to major retaliations)

Question 15

consumption

Answer 15

spending on goods and services by individuals or households

Question 16

account deficit

Answer 16

a situation where the outflows of money on a component of the balance of payments are greater than the inflows

Question 17

trade deficit

Answer 17

when imports are greater than exports

Question 18

trade surplus

Answer 18

when exports are greater than imports

Question 19

administrative barriers

Answer 19

government laws or procedures that may
result in reduced trade

Question 20

trading bloc

Answer 20

a group of countries that have agreed to eliminate trade barriers to encourage free trade and cooperation between them

Question 21

preferential trade agreement

Answer 21

a group of countries that have agreed to lower trade barriers on a particular product in trade

Question 22

free trade area

Answer 22

a group of countries that agreed to demolish trade barriers between themselves

Question 23

custom union

Answer 23

a group of countries that fulfil the free trade area requirements and adopts common external policy towards non-members

Question 24

common market

Answer 24

group of countries that applies common external regulation and common product regulation.

Question 25

bilateral trade agreement

Answer 25

trade-related agreement between 2 countries

Question 26

multilateral trade agreement

Answer 26

trade-related agreement between 2 or more countries

Question 27

regional trade agreement

Answer 27

trade-related agreement between a group of countries

Question 28

economic integration

Answer 28

economic cooperation between countries that increases links between them