Global Definitions

Question 1

Balance of Payments

Answer 1

A record of transactions in trade, income, transfers and capital flows between one country and the rest of the world over a given period of time.

The three main components are the current account, the capital account and the financial account.

Question 2

Balance of Trade

Answer 2

A measure of the difference between the total value of exports minus the total value of imports over a period of time.

Question 3

Barter

Answer 3

The exchange of goods or services for other goods or services without using money.

Question 4

Absolute Advantage

Answer 4

AA in the production of goods which it produces more efficiently than the rest of the world.

Question 5

Comparative Advantage

Answer 5

Two countries will gain from trade if they each choose to specialise in the production of the good with the lowest opportunity cost.

Question 6

Debit

Answer 6

When money leaves a country

Question 7

Credit

Answer 7

Money coming into a country

Question 8

Debt Relief

Answer 8

Where part or all of a country’s debt is cancelled and not paid back.

Question 9

Debt Restructuring

Answer 9

Where there is an extension of payments, change in interest rate or reduction in the amount of a loan (called a ‘haircut’) to make it easier for the debtor country to manage the payments.

Question 10

Dumping

Answer 10

Firms exporting their goods at a price below production cost. It is a type of predatory pricing behaviour.

An importer may sell or ‘dump’ goods abroad in order to gain a foothold in a new market.

Question 11

ELDCs

Answer 11

Low-income country facing severe structural challenges to sustainable development.

Question 12

Fair Trade

Answer 12

Trade that promotes equity in international trade by offering fair payment to producers in the developing world, as well as improving environmental and social standards.

Question 13

Globalisation

Answer 13

The cooperation and integration of the world through multiple perspectives such as culture, technology, the cross-national movement of goods and people, and more.

Question 14

Immigration

Answer 14

Individuals entering a country to reside on a permanent basis.

Immigration can increase the number of workers available.

Question 15

Indebtness

Answer 15

Condition of owing money.

Question 16

Infant/Sunrise Industry

Answer 16

Industry that has just opened up and is not yet large enough to take advantage of economies of scale.

Question 17

Interdependent Countries

Answer 17

Countries are interdependent when they become reliant on each other.

Question 18

IMF

Answer 18

An international organisation that aims to:
- Promote global economic growth and financial stability
- Encourage international trade
- Reduce poverty

Question 19

International trade

Answer 19

Exchange of goods and services across international borders.

Question 20

Multilateral Development Assistance

Answer 20

The support provided by organisations to which many countries contribute.

Question 21

MNC

Answer 21

Companies that operate in many countries with a headquarters based in one to coordinate the global operation.

Question 22

NGO’s

Answer 22

Non-profit, citizen-based group that functions independently of government.

Question 23

Official Borrowing

Answer 23

Occurs when the government borrows (debit) or lends (a credit item) money from the IMF, World Bank, or the government from another country.

Question 24

Outsourcing

Answer 24

Moving factories and production processes to foreign countries, usually to reduce costs of production.

Question 25

Sustainable Development Goals (SDGs)

Answer 25

A set of 17 global goals, focusing on the environment, society and the economy, that aim to move the world to a more sustainable future.

Question 26

Terms of Trade

Answer 26

Measures a country’s export prices in relation to its import prices

Question 27

Theory of Comparative Advantage

Answer 27

States that two countries can both gain from trade if each one chooses to specialise in the production of the good it can produce with the lowest opportunity cost.

Question 28

Trade Union

Answer 28

Formal organisations that represent the interests of workers.

They bargain with employers on behalf of workers for improved pay and working conditions.

Question 29

World Bank

Answer 29

An international organisation focused on fighting world poverty by providing developmental assistance to poorer nations.

Question 30

World Trade Organisation

Answer 30

A global international organisation focused on improving free trade by providing a medium for trade negotiations and acting as a moderator for trade disputes.