Definitions- The Global Economy (topic 1)

Question 1

Globalisation

Answer 1

The process by which people and countries are more closely linked. Organisations start operating on an international scale.

Question 2

GWP

Answer 2

Gross world Product (GWP) or Global gross domestic product (GDP) - Refers to the sum of total output of goods and services by all economies in the world over a period of time. Nominal world GDP was US$84.84 trillion in 2018.

Question 3

IMF

Answer 3

(made 1945)International Monetary fund- organisation of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.

Question 4

Finance

Answer 4

Short term speculative shifts of money as finance vs longer term flows of money to by or establish businesses as investments.

Question 5

FDI

Answer 5

Foreign Direct investment - 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).
FDI is generally considered to be a long-term investment and the investor normally intends to play a role in the management of the business.

Question 6

TNCs

Answer 6

Transnational coporation- 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. eg. Apple, Shell, Toyota

Question 7

International division of labour

Answer 7

How the production of task in the production process are allocated to people in different countries. This is an example of comparative advantage. Can occur when businesses move to find cheap labour or people move to find work.

Question 8

Offshoring

Answer 8

Companies to shift production between countries to reduce costs. This results in the development of export-oriented economies that can compete on the basis of their abundance of low wage labour.

Question 9

Brain drain

Answer 9

Those who are attracted to other countries by greater rewards. (Skilled labour)

Question 10

Creditors

Answer 10

A person or company to whom money is owing. eg. employees owed wages.

Question 11

Free trade

Answer 11

A situation where governments do not impose artificial barriers to trade e.g. Tariffs or subsidies

Question 12

WTO

Answer 12

The World Trade Organisation- deals with the global rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

Question 13

The World Bank

Answer 13

International financial institution that provides loans to countries of the world for capital projects. Comprised of: the International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA).

Question 14

UN

Answer 14

The United Nations is an international organisation founded in 1945. Currently 193 Member States. The mission and work of the UN are guided by the purposes and principles in its founding Charter.

Question 15

OECD

Answer 15

The Organisation for Economic Co-operation and Development. Promotes policies that will improve the economic and social well-being of people around the world. They measure productivity, predict future trends, set international standards (eg. agriculture)

Question 16

G7/8

Answer 16

A group consisting of Canada, France, Germany, Italy, Japan, the UK, and the US.

Question 17

G20

Answer 17

(20 countries) an international forum for the governments and central bank governors from Argentina, Australia, Canada, China etc.

Question 18

Trading Blocs

Answer 18

A type of intergovernmental agreement, often part of a regional intergovernmental organisation, where barriers to trade are reduced or eliminated among the participating states.
Can either be Monetary Unions e.g. the EU or a Free Trade Agreement e.g.

Question 19

Monetary Unions

Answer 19

A currency union (monetary union) involves two or more states sharing the same currency without them necessarily having any further integration

Question 20

FTA

Answer 20

Free Trade Agreements - are international treaties that reduce barriers to trade and investment

Question 21

Protection

Answer 21

Any type of government action that has the effect of giving domestic producers an artificial advantage over foreign competitors. (tariffs, import quotas, subsidies)

Question 22

Infant industry

Answer 22

A new industry, which in its early stages experiences relative difficulty or is incapable in competing with established competitors abroad.

Question 23

Dumping

Answer 23

The practice of exporting goods to a country at a price lower than their selling price in their country of origin.

Question 24

Tariffs

Answer 24

Taxes on imported goods imposed for the purpose of protecting domestic industries.

Question 25

Consumer surplus (calc)

Answer 25

total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) minus the total amount that they actually do pay (i.e. the market price).

Question 26

Producer surplus

Answer 26

how much of a good the producer is willing to supply minus how much he receives in the trade.

Question 27

Deadweight loss

Answer 27

A cost to society created by market inefficiency (in allocation of resources).

Question 28

Subsidies

Answer 28

Cash payments from the gov to businesses to encourage production of a good or service and influence the allocation of resources in an economy. Help them compete with overseas.

Question 29

Quota

Answer 29

Restrictions on the amounts or values of various kinds of goods that may be imported.

Question 30

Local content rules

Answer 30

specify that goods must contain a minimum percentage of locally made parts. In return for guaranteeing a certain percentage of a good will be locally made, the imported components may not attract a tariff.

Question 31

EMDG

Answer 31

Export Market Development Grant- provides direct funding and general assistance to local manufacturers looking to break into international markets. Example of export incentive

Question 32

GNI

Answer 32

Gross National Income- is the sum of value added by all resident producers in an economy plus receipts of primary income from foreign sources.

Question 33

PPP

Answer 33

Purchasing power parity- is a theory that states that exchange rates should adjust to equalise the price of identical goods and services in different economies throughout the world.

Question 34

GDP per capita

Answer 34

The value of all final goods and services produced within a nation in a given year, converted at market exchange rates to current U.S. dollars, divided by the average population for the same year.

Question 35

GNI per capita (old name GNP)

Answer 35

Gross national income/product- The dollar value of a country’s final income in a year, divided by its population. It reflects the average income of a country’s citizens.