Definitions

Question 1

Who is the World Trade Organisation?

Answer 1

The World Trade Organisation (WTO) is an organisation of 164 member countries that implements and advances global trade agreements and resolves trade disputes between nations.

Question 2

What is the definition of trade?

Answer 2

Trade is a basic economic concept involving the buying and selling of goods and services.

Question 3

What are speculators?

Answer 3

Speculators are investors who buy and sell financial assets with the aim of making profits from short-term price movements.

Question 4

Who are the International Monetary Fund?

Answer 4

The IMF is an international agency that consists 189 members and oversees the stability of the global financial system - function of the IMF is to ensure stability of exchange rates.

Question 5

Who are the World Bank?

Answer 5

The World Bank is an international financial institution that provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects.

Question 6

What is Foreign Direct Investment?

Answer 6

FDI refers to 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 per cent or more).

Question 7

What are Transnational Corporations?

Answer 7

TNCs are global companies that dominate global product and factor markets. TNCs have production facilities in at least two countries and are owned by residents of at least two countries.

Question 8

What is the International Business Cycle?

Answer 8

International business cycle refers to fluctuations in the level of economic activity in the global economy over time.

Question 9

What is the Regional Business Cycle?

Answer 9

Regional business cycle refers to the fluctuations in the level of economic activity within a specific region or area over time, e.g Europe.

Question 10

What is a comparative advantage?

Answer 10

In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost.

Question 11

What is an absolute advantage?

Answer 11

The principle of absolute advantage refers to the ability of a party to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.

Question 12

What is protectionism and what are the main measures?

Answer 12

Protection can be defined as any type of government action that has the effect of giving domestic producers an artificial advantage over foreign competitors. The main protectionists measures include, tariffs, subsidies, import quotas, export incentives and local content rules.

Question 13

What is dumping?

Answer 13

Dumping is when a firm sells its goods in another country at an unreasonably low price, usually to establish market share or to get rid of excess stock.

Question 14

What is a tariff?

Answer 14

A tariff is a tax imposed by a government on goods and services imported from other countries that serves to increase the price and make imports less desirable, or at least less competitive, versus domestic goods and services.

Question 15

What is a quota?

Answer 15

A quota is a government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period.

Question 16

What is a subsidy?

Answer 16

The government may aid firms by providing payments to offset their costs of production this is known as a subsidy.

Question 17

What is a trade bloc?

Answer 17

A trading bloc is formed when a number of countries agree to give each other preferential terms at the exclusion of other countries.

Question 18

What is the purchasing power parity theory?

Answer 18

Purchasing power parity (PPP) is a theory which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.

Question 19

What is economic development?

Answer 19

Economic development is the process by which the economic well-being and quality of life of a nation, region or local community are improved.

Question 20

What is the human Development Index?

Answer 20

The Human Development Index (HDI) is a statistical tool used to measure a country’s overall achievement in its social and economic dimensions, based on the health of people, their level of educational attainment and their standard of living.

Question 21

What are developing economies?

Answer 21

A developing economy also called a less developed economy or underdeveloped country is a nation with an underdeveloped industrial base, and a low Human Development Index (HDI) relative to other countries.

Question 22

What are emerging economies?

Answer 22

Emerging markets, also known as emerging economies or developing countries, are nations that are investing in more productive capacity. They are moving away from their traditional economies that have relied on agriculture and the export of raw materials.

Question 23

What does the term composition of trade mean?

Answer 23

The mix of what goods and services are traded.

Question 24

Define the term brain gain.

Answer 24

An increase in the number of highly trained, foreign-born professionals entering a country to live and work where greater opportunities are offered.

Question 25

Define the term brain drain.

Answer 25

The emigration of highly trained or qualified people from a particular country.

Question 26

Define the term immigration.

Answer 26

The action of coming to live permanently in a foreign country.

Question 27

Define the term emigration.

Answer 27

The act of leaving one’s own country to settle permanently in another.

Question 28

Define the term derivative.

Answer 28

Financial security with a value that is reliant upon or derived from an asset (e.g shares/stocks, currency, bonds, interest rates).

Question 29

Refer to the term international division of labour.

Answer 29

It is how the tasks in the production process are allocated to different people in different countries around the world.

Question 30

What is offshoring?

Answer 30

The process allows companies to shift production between countries to reduce costs.

Question 31

What is Gross Domestic Product?

Answer 31

Is the total market value of all final goods and services produced in an economy over a period of time.

Question 32

Define the term aquisition.

Answer 32

To gain control over another firm, usually through the purchase of shares of the company or to buy assets of the business directly. Acquisition may involve a takeover where one firm buys out another, often against the wishes of certain taxpayers.

Question 33

What is free trade?

Answer 33

Free trade occurs when artificial barriers such as subsidies and tariffs are removed. According to free trade the market is left to determine which wants are to be satisfied and which businesses will succeed or fail.

Question 34

What is trade diversion?

Answer 34

Trade diversion is where a country’s Imports of a good or service switch from coming from the most efficient producer to another country because of the impacts of a trade agreements provisions.

Question 35

What is the difference between FTAs and Trading blocs?

Answer 35

Free trade agreements are created to lower trade barriers and to stimulate trade between member countries; trading blocs are groups of countries that have reached a common agreement to lower trade barriers throughout the group (e.g., NAFTA, ASEAN, and the European Union).

Question 36

What are automatic stabilisers?

Answer 36

Automatic stabilisers are instruments in the budget that counterbalance economic activity. The most common example is the progressive tax system.

Question 37

What is the difference between automatic stabilisers and discretionary fiscal policy?

Answer 37

If a government has to take any action to make it happen, it is discretionary fiscal policy. If it is something that happens on its own, it is an automatic stabiliser.

Question 38

What is the difference between monetary policy and fiscal policy?

Answer 38

Both fiscal and monetary policy are an attempt to reduce economic fluctuations and smooth out the business cycle. The main difference is that Monetary policy uses interest rates set by the RBA. Fiscal policy involves changing government expenditure (spending) and revenue (taxes) to influence the level of aggregate demand.

Question 39

What is the difference between Nominal and real GDP?

Answer 39

Nominal GDP is calculated using the current market prices of goods while real GDP is calculated using a constant base year for market prices (this is the adjustment for the effects of inflation) Real GDP is a more reflective of economic growth over time as its measurement is not distorted by fluctuations in prices.

Question 40

What is the Gini coefficient?

Answer 40

Is a number between zero and one that measures the extent of income inequality in an economy. It is calculated by measuring the degree to which the Lorenz curve deviates from the line of equality.

Question 41

What is the Lorenz curve?

Answer 41

Is a graphical representation of income distribution, plotting the cumulative increase in population against the cumulative increase in income.

Question 42

What is dissaving?

Answer 42

The action of spending more than one has earned in a given period.

Question 43

What is collusion?

Answer 43

Collusion is a non-competitive, illegal agreement between rivals which attempts to disrupt the market’s equilibrium. The act of collusion involves people or companies which would typically compete against one another, working together to gain an unfair market advantage.

Question 44

What is the private sector?

Answer 44

The part of the national economy that is not under government control.

Question 45

What is the public sector?

Answer 45

Refers to the parts of the economy that are owned or controlled by the government. It includes all tiers of the government as well as government business enterprises.

Question 46

What is relative poverty?

Answer 46

Relative poverty refers to those whose standards of living is substantially lower than the average for the economy as a whole and is often defined as a level of income below 30% of average earnings.

Question 47

What is absolute poverty?

Answer 47

Absolute poverty refers to a situation where individuals have only just enough income to enable them to survive.

Question 48

What are free riders?

Answer 48

Free riders are groups or individuals who benefit from a good or service without contributing to the cost of supplying the good or service. As a consequence, the good or service is likely to be undersupplied in relation to the total demand.

Question 49

What is a float?

Answer 49

Occurs when a company lists itself on the stock exchange and offers it’s shares to the general public for the first time.

Question 50

What is speculation?

Answer 50

Occurs when investors buy assets with the intention of reselling them for a higher price within a short period.

Question 51

What is autonomous consumption?

Answer 51

Autonomous consumption is the minimum level of consumption or spending that must take place even if a consumer has no disposable income, such as spending for basic necessities (needs rather than wants).

Question 52

What is conspicuous consumption?

Answer 52

Consumption of luxuries on a lavish scale in an attempt to enhance one’s prestige.

Question 53

What are real wages?

Answer 53

Real wages takes into account inflation. An increase in real wages occurs when wages rise quicker than inflation.

Question 54

What are nominal wages?

Answer 54

A nominal wage is the amount of money an individual earns per hour of labour. The nominal wage doesn’t tell someone what their purchasing power is because it’s not adjusted for inflation.

Question 55

What is structural change?

Answer 55

Structural change is a shift or change in the basic ways a market or economy functions or operates.

Question 56

What is the All Ordinaries Index?

Answer 56

An index measuring changed in the overall value of companies listed on the Australian Securities Exchange.

Question 57

What are financial intermediaries?

Answer 57

Firms that receive funds from individuals or businesses, and then make loans to other businesses or individuals who can make use of them.

Question 58

What are externalities?

Answer 58

An externality is an economic term referring to a cost or benefit incurred or received by a third party. However, the third party has no control over the creation of that cost or benefit.

Question 59

What is insider trading?

Answer 59

When company directors use non-public information about the company to by and sell shares on the share market to make a profit.

Question 60

What is liquidity?

Answer 60

Liquidity is the ease with which a financial asset can be transformed into cash so it can be used as a medium of exchange.

Question 61

What is privatisation?

Answer 61

Occurs when the government sells public trading enterprises to the public sector. Through direct involvement in the market, governments were considered better able.

Question 62

What is corporatisation?

Answer 62

Corporatisation occurs when the government changes the rules around how government-owned businesses are operated so that they behave more like private sector businesses, independent from the government.

Question 63

What is the difference between privatisation and corporatisation?

Answer 63

Privatisation is the transfer of a company or organisation from government to private ownership and control while corporatisation is the privatisation of a publicly-owned organisation.

Question 64

What is the difference between automatic stabilisers and discretionary fiscal policy?

Answer 64

If a government has to take any action to make it happen, it is discretionary fiscal policy. If it is something that happens on its own, it is an automatic stabiliser.

Question 65

What is the difference between monetary policy and fiscal policy?

Answer 65

Both fiscal and monetary policy is an attempt to reduce economic fluctuations and smooth out the business cycle. The main difference is that Monetary policy uses interest rates set by the Central Bank. Fiscal policy involves changing government expenditure (spending) and revenue (taxes) to influence the level of aggregate demand.

Question 66

What is the difference between microeconomic and macroeconomic policies?

Answer 66

Macroeconomic policies are aimed at increasing demand through fiscal and monetary policy; while microeconomic policies aim to increase supply/production through labour market policies.