Definitions For Global Economy Flashcards
Monopoly
When a market is dominated by one firm and high barriers to enter it exists
Free trade agreement
When 2 or more countries phase out or eliminate tariffs between them while maintaining existing barriers to non-members
Tariff
A tax on imports aimed at protecting domestic firms and jobs
Quota
A quantitative restriction of imports aimed at protecting domestic firms and jobs
Production subsidy
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
Export subsidy
A per unit payment by the government to firms based only on the units of output exported
Administrative barriers
Regulations that result in a lower level of imports into a country
Preferential trade agreements
Any agreement between countries that decreases or eliminates trade barriers
Bilateral agreement
A preferential trade greenest between two countries
Multilateral agreement
Trade agreements that are negotiated and administered. Through the world trade organisation
World Trade Organisation
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
Free trade area
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
Customs union
An agreement between countries whereby members abolish tariffs between them and establish a common external tariff toward nonmembers
Common market
An agreement between countries to not only phase out or eliminate trade barriers but to also permit free movement of labour and capital
Economic integration
Decreasing or eliminating trade and other barriers between countries and coordinating competition, environmental and macroeconomic policies.
Economic union
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
Monetary union
When countries in an economic inion agree to share a currency and a central bank
Exchange rate
The price of a currency expressed in terms of another currency
Floating exchange rate system
When the exchange rate is determined by the interaction of demand and supply without any government or CB intervention
Fixed exchange rate system
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
Managed exchange rate system
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
Appreciation
When the price of a currency increases in a flexible exchange rate system
Depreciation
A decrease in the exchange rate of a currency within a floating exchange rate system
Devaluation
A decrease in the exchange rate within a fisted exchange rate system
