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
Revaluation
An increase in the exchange rate within a fixed exchange rate system
Remittances
Money sent by migrant workers back home
Portfolio investment
Refers to the acquisition of stocks and bonds and other financial assets by investors which do not provide them with ownership or management rights
Foreign direct investment
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
Current account
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
Balance of payments
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
Balance of trade
The difference between export revenues and import expenditures on goods and services, over a time period
Current account deficit
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
Current account surplus
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
Financial account
Records portfolios and FDI into and out of a country over a period of time as well as changes in reserve assets
Sustainable development
Development that meets the needs of the present generation without comprising the ability of future generations to meet their own needs
Economic development
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
Poverty cycle
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
Foreign aid
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
