Econs Flashcards
Trade
Buying, selling or exchanging goods and services.
The Global Economy
The economies of the world’s individual countries considered together as a single economic system.
Import
Bring goods in from another country to be sold in Australia.
Export
Send goods to other countries to be sold.
Free Trade Agreements
Pacts between countries that make it easier to trade goods across national boundaries through removing barriers to trade (tariffs and quotas).
GDP
Gross Domestic Product. The monetary value of final goods and services produced in a country in a given period of time.
Protectionism
Government policies that restrict international trade to help domestic industries.
Tariffs
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 than domestic goods and services.
Specialisation
When a country concentrates production on one or a few goods and services it can produce efficiently (at a low cost).
Benefits of specialisation
The country is able to produce a greater quantity of output because it does not ‘waste’ its scarce resources on producing goods and services at a relatively high cost. This allows it to increase its consumption, improving standard of living. This allows them to consume at a point beyond their production possibility frontier.
Production possibility frontier (PPF)
A graph which represents all the possible production combinations within a country, for a given amount of resources
Absolute advantage
The ability of a country to produce a larger volume of goods/services with fewer inputs compared to another country.
Comparative advantage
The ability of a country to produce a good/service at a lower opportunity cost compared to another country.
Benefits of trade
Access to cheaper and more diverse goods, as well as higher standard of living and economic growth. It also creates and supports jobs.
Costs of trade
Loss of employment and exploitation of workers, as well as environmental degradation.
Linkages
Economic interactions between countries that include trade, foreign investment, and movement of people (tourism, migration, education).
Investment
The production of goods that will be used to produce other goods. Ie. anything that can be used for generating future income.
Circular flow of income
An economic model that describes the flow of money through the economy with key sectors such as households, firms, the Government, financial institutions, and the overseas sector.
Business trade cycle (BTC)
A series of stages in the economy as it expands and contracts. It is primarily measured by the rise and fall of gross domestic product (GDP) in a country.
Upswing/expansion
Desirable state of the economy. Businesses and companies grow their production and profits, unemployment is low. Consumers are buying and investing, and with this increasing demand for goods and services, prices begin to rise too (inflation).
Peak
The economy starts growing out of control. This indicates that production and prices have reached their limit.
Downswing/contraction
A contraction spans the length of time from the peak to the trough. It’s the period when economic activity is on the way down. During a contraction, unemployment numbers typically spike, stocks enter a bear market, and GDP growth is below 2%, indicating that businesses have cut back their activities.
