Definitions Flashcards
The Global Economy
Where the economies of individual countries are linked to each other and changes in a single economy can have ripple effects on others.
Globalisation
integration, interdependence and interconnectedness between different countries/economies and the increased impact of international influences on life and economic activity.
Advanced Economies
Usually market-based economies characterised by high levels of economic development with average per capita incomes of over $US 58,000
Developing Economies
These countries generally have low-income levels, human resources with poorer education and health outcomes, and have only experienced industrialisation to a limited extent.
Emerging Economies
These economies are in the process of industrialisation or modernisation, and experiencing sustained high levels of economic growth
Growth World Product
GWP the total value of goods and services produced in the world over a period of time. (GDP for the whole world)
Purchasing power parity (PPP)
The idea that the price of a good in one country should be the same as its price in another country after adjusting for the exchange rate between the two countries.
Migration:
The movement of people between countries on a permanent or long-term basis, usually for 12 months or longer.
Foreign Direct Investment:
The movement of funds between economies for the purpose of establishing a new company or buying a substantial proportion of shares in an existing company ( 10% + ); generally long-term and not speculative.
Transnational Corporations:
Large business organizations that operate across national borders, maintaining business activities in multiple countries simultaneously.
Financial Deregulation:
Widespread dismantling of government controls and oversight of financial markets and institutions.
Foreign Exchange / Forex markets:
Networks of buyers and sellers exchanging one currency for another in order to facilitate flows of finance between countries.
Exchange Rate:
Is the value of one currency expressed in terms of another currency
Speculation:
Investors who shift billions of dollars in and out of financial markets by buying and selling assets, with the aim of making profits from short-term price movements.
Business Cycle:
Refers to fluctuations in the level of economic growth due to either domestic or international factors.
International business cycle:
changes in the level of economic activity in the global economy over time.
Regional Business Cycles:
Fluctuations in the level of economic activity in a geographical region of the global economy over time.
Free trade:
where governments impose no artificial barriers (Tariffs, etc) that restrict trade between countries to shield domestic producers from competition.
comparative advantage;
the economic principle that nations should specialise in the areas of production in which they have the lowest OC, and trade with other nations so as to maximise both nations’ standards of living.
Opportunity Cost
The opportunity foregone when one alternative resource is chosen over another.
Absolute Advantage
Where a country, with a given level of resources, can produce more output than another country with the same level of resources.
Protection:
any type of government action that has the effect of giving domestic producers an artificial advantage over foreign competitors, including tariffs, import quotas and subsidies.
Austerity Measures:
Strict economic policies used by governments to manage public debt. There are two main types:
- Higher taxes
- Lower government spending
Global Economic Forums:
Organisations that exist as forums for world leaders play an important role in coordinating policies between major economies, especially during times of economic or financial crisis
