Definitions For Global Economy

Question 1

Monopoly

Answer 1

When a market is dominated by one firm and high barriers to enter it exists

Question 2

Free trade agreement

Answer 2

When 2 or more countries phase out or eliminate tariffs between them while maintaining existing barriers to non-members

Question 3

Tariff

Answer 3

A tax on imports aimed at protecting domestic firms and jobs

Question 4

Quota

Answer 4

A quantitative restriction of imports aimed at protecting domestic firms and jobs

Question 5

Production subsidy

Answer 5

A per unit payment by the government on all units of the good produced by a firm, leading to a decrease in their production costs

Question 6

Export subsidy

Answer 6

A per unit payment by the government to firms based only on the units of output exported

Question 7

Administrative barriers

Answer 7

Regulations that result in a lower level of imports into a country

Question 8

Preferential trade agreements

Answer 8

Any agreement between countries that decreases or eliminates trade barriers

Question 9

Bilateral agreement

Answer 9

A preferential trade greenest between two countries

Question 10

Multilateral agreement

Answer 10

Trade agreements that are negotiated and administered. Through the world trade organisation

Question 11

World Trade Organisation

Answer 11

An international organisation that includes 164 countries which provides a forum for trade negotiations, sets and enforces trade rules and is the arbitrator of trade related disputes among members

Question 12

Free trade area

Answer 12

Formed when a group of countries agrees to phase out or eliminate trade barriers between them while each maintains its won tariff toward non-members

Question 13

Customs union

Answer 13

An agreement between countries whereby members abolish tariffs between them and establish a common external tariff toward nonmembers

Question 14

Common market

Answer 14

An agreement between countries to not only phase out or eliminate trade barriers but to also permit free movement of labour and capital

Question 15

Economic integration

Answer 15

Decreasing or eliminating trade and other barriers between countries and coordinating competition, environmental and macroeconomic policies.

Question 16

Economic union

Answer 16

When a group of countries not only agree to free movement of goods and services and to the free movement of labour and capitals but also adopt common environmental, competition and other policies

Question 17

Monetary union

Answer 17

When countries in an economic inion agree to share a currency and a central bank

Question 18

Exchange rate

Answer 18

The price of a currency expressed in terms of another currency

Question 19

Floating exchange rate system

Answer 19

When the exchange rate is determined by the interaction of demand and supply without any government or CB intervention

Question 20

Fixed exchange rate system

Answer 20

When the exchange rate is set by the CB at a level or within an announced range and is then maintained there through buying and selling of the currency in teh forex and/or manipulating the interest rate

Question 21

Managed exchange rate system

Answer 21

An exchange system in which the CB periodically intervenes whenever the currency moves in a direction or a speed considered undesirable. IN some cases the currency floats within a desired but disclosed band

Question 22

Appreciation

Answer 22

When the price of a currency increases in a flexible exchange rate system

Question 23

Depreciation

Answer 23

A decrease in the exchange rate of a currency within a floating exchange rate system

Question 24

Devaluation

Answer 24

A decrease in the exchange rate within a fisted exchange rate system

Question 25

Revaluation

Answer 25

An increase in the exchange rate within a fixed exchange rate system

Question 26

Remittances

Answer 26

Money sent by migrant workers back home

Question 27

Portfolio investment

Answer 27

Refers to the acquisition of stocks and bonds and other financial assets by investors which do not provide them with ownership or management rights

Question 28

Foreign direct investment

Answer 28

Refers to long-term investment by firms from one country in productive facilities in another country. FDI includes both investing in new facilities and acquiring a controlling % of the existing local companies

Question 29

Current account

Answer 29

Records the value of exports and imports of goods and services of a country, net income from investments and net current transfers over a period of time

Question 30

Balance of payments

Answer 30

A record of the value of all transactions of a country with the rest of the world;subdivided into the current account, the capital account and the financial account

Question 31

Balance of trade

Answer 31

The difference between export revenues and import expenditures on goods and services, over a time period

Question 32

Current account deficit

Answer 32

A current deficit exists when the sum of net exports of goods and services plus net income from investments plus net current transfers is negative

Question 33

Current account surplus

Answer 33

A current surplus exists when the sum of net exports of goods and services plus net income from investments plus net current transfers is positive

Question 34

Financial account

Answer 34

Records portfolios and FDI into and out of a country over a period of time as well as changes in reserve assets

Question 35

Sustainable development

Answer 35

Development that meets the needs of the present generation without comprising the ability of future generations to meet their own needs

Question 36

Economic development

Answer 36

A multidimensional concept as it refers to an improvement in living standards which involves in per capita income levels, reductions in poverty, increased access to health care and education , increased employment opportunities, as well as reduced inequalities of income and wealth

Question 37

Poverty cycle

Answer 37

A vicious circle in which low incomes leading to poverty are responsible for low savings which are able to finance limited investments leading to low labour productivity and thus to low income levels

Question 38

Foreign aid

Answer 38

Any flow of capital from developed to developing countries that is non-commercial from the POV of the donor and for which the terms are concessional