Definitions

Question 1

The Global Economy

Answer 1

Where the economies of individual countries are linked to each other and changes in a single economy can have ripple effects on others.

Question 2

Globalisation

Answer 2

integration, interdependence and interconnectedness between different countries/economies and the increased impact of international influences on life and economic activity.

Question 3

Advanced Economies

Answer 3

Usually market-based economies characterised by high levels of economic development with average per capita incomes of over $US 58,000

Question 4

Developing Economies

Answer 4

These countries generally have low-income levels, human resources with poorer education and health outcomes, and have only experienced industrialisation to a limited extent.

Question 5

Emerging Economies

Answer 5

These economies are in the process of industrialisation or modernisation, and experiencing sustained high levels of economic growth

Question 6

Growth World Product

Answer 6

GWP the total value of goods and services produced in the world over a period of time. (GDP for the whole world)

Question 7

Purchasing power parity (PPP)

Answer 7

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.

Question 8

Migration:

Answer 8

The movement of people between countries on a permanent or long-term basis, usually for 12 months or longer.

Question 9

Foreign Direct Investment:

Answer 9

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.

Question 10

Transnational Corporations:

Answer 10

Large business organizations that operate across national borders, maintaining business activities in multiple countries simultaneously.

Question 11

Financial Deregulation:

Answer 11

Widespread dismantling of government controls and oversight of financial markets and institutions.

Question 12

Foreign Exchange / Forex markets:

Answer 12

Networks of buyers and sellers exchanging one currency for another in order to facilitate flows of finance between countries.

Question 13

Exchange Rate:

Answer 13

Is the value of one currency expressed in terms of another currency

Question 14

Speculation:

Answer 14

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.

Question 15

Business Cycle:

Answer 15

Refers to fluctuations in the level of economic growth due to either domestic or international factors.

Question 16

International business cycle:

Answer 16

changes in the level of economic activity in the global economy over time.

Question 17

Regional Business Cycles:

Answer 17

Fluctuations in the level of economic activity in a geographical region of the global economy over time.

Question 18

Free trade:

Answer 18

where governments impose no artificial barriers (Tariffs, etc) that restrict trade between countries to shield domestic producers from competition.

Question 19

comparative advantage;

Answer 19

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.

Question 20

Opportunity Cost

Answer 20

The opportunity foregone when one alternative resource is chosen over another.

Question 21

Absolute Advantage

Answer 21

Where a country, with a given level of resources, can produce more output than another country with the same level of resources.

Question 22

Protection:

Answer 22

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.

Question 23

Austerity Measures:

Answer 23

Strict economic policies used by governments to manage public debt. There are two main types:
- Higher taxes
- Lower government spending

Question 24

Global Economic Forums:

Answer 24

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

Question 25

Free trade agreements:

Answer 25

formal agreements between countries designed to break down barriers to trade between those nations.

Question 26

A trading bloc

Answer 26

A trading bloc occurs when a number of countries join together in a formal preferential trading arrangement, to the exclusion of other countries, such as the EU and the USMCA, or NAFTA.

Question 27

trade diversion;

Answer 27

where a country’s imports of a GorS switch from coming from the most efficient producer to a less efficient producer, or country with whom a regional trade agreement exists, because of the impacts of a trade agreement’s provisions, such as tariff levels, import quotas, or other rules.

Question 28

Monetary Unions:

Answer 28

Where two or more countries share a common country and common interest rate.

Question 29

Protection:

Answer 29

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.

Question 30

Dumping

Answer 30

occurs when foreign firms attempt to sell their goods in another country’s market at unrealistically low prices; below the price charged in the country’s home market.

Question 31

Tariffs:

Answer 31

taxes on imported goods imposed for the purpose of protecting Australian industries; they have the effect of raising the price of imported goods, making the domestic producer more domestically competitive, not internationally competitive.

Question 32

Quotas

Answer 32

refer to restrictions on the amounts or values of various kinds of goods that may be imported;

Question 33

Subsidies

Answer 33

Subsidies are cash payments ( Financial Assistance ) from the government to businesses to encourage production of a good or service, and influence the allocation of resources in an economy;

Question 34

Local content rules

Answer 34

Local content rules specify that goods must contain a minimum percentage of locally-made parts in order to avoid a tariff

Question 35

Export incentive programs

Answer 35

give domestic producers assistance, such as grants, loans or technical advice, and encourage businesses to penetrate global markets or expand their market share…

Question 36

Economic Growth

Answer 36

Measures the formal economy in quantitative terms and in tangible results, mostly focusing on GDP and overall output.

Question 37

Economic Development

Answer 37

Focuses on improvements in welfare, rather than just how much money people have.

Question 38

Free Trade:

Answer 38

any trading situation where governments impose no artificial barriers (such as tariffs, subsidies and laws) to trade that restrict the exchange of goods and services between countries with the aim of shielding domestic producers from foreign competition.

Question 39

Wealth

Answer 39

measures the amount of valuable economic goods that have been accumulated at a given point in time

Question 40

Incomes

Answer 40

measure the amount of money (or goods) that is obtained over a given interval of time.

Question 41

Gross National Income ( GNI )

Answer 41

is the sum of the value added by all resident producers in an economy, plus receipts of primary income from foreign sources;

Question 42

The Human Development Index (HDI)

Answer 42

is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable, and having a decent standard of living.