global definitions

Question 1

inflation

Answer 1

sustained increase in general price level

Question 2

deflation

Answer 2

sustained decrease in general price level

Question 3

fdi

Answer 3

physical investment in the hosting economy done by foreign multi-national corporations with at least 10% ownership

Question 4

exchange rate

Answer 4

value of a currency in terms of another currency

Question 5

current account

Answer 5

financial records recounts all money inflow and outflow between local economy and foreign economy in visible trade, invisible trade, income flow and current transfer

Question 6

depreciation

Answer 6

decrease in the VALUE of a currency in terms of another currency under floating exchange rate system

Question 7

appreciation

Answer 7

increase in the VALUE of a currency in terms of another currency under floating exchange rate system

Question 8

devaluation

Answer 8

decrease in the value of a currency in terms of another currency under fixed exchange rate system

Question 9

revaluation

Answer 9

increase in the value of a currency in terms of another economy under fixed exchange rate system

Question 10

circular economy

Answer 10

an economy that recycle, reuses and promotes environmental sustainability

Question 11

humanitarian aid

Answer 11

financial assistance from foreign economy to help emergency needs for improving basic necessities for human under disaster or war

Question 12

debt servicing

Answer 12

use the government revenue to finance or repay the debt or loan by the domestic government to the bank or foreign government

Question 13

tariff

Answer 13

tax on imported goods and services

Question 14

import quota

Answer 14

limit on the quantity on imported goods are allowed to import

Question 15

administrative barrier

Answer 15

trade barriers to reduce import by non-tariffs and quota means, eg control on quality, increase inspection

Question 16

trade war

Answer 16

countries impose trade barriers to each other

Question 17

overvalued currency

Answer 17

• has a value that is too high relative to its equilibrium free market value
• exchange rate has been set at a higher level than the market equilibrium exchange rate

Question 18

undervalued currency

Answer 18

• value it too low relative to its equilibrium free market value
• exchange rate is low relative to the one the market would have determined

Question 19

economic integration

Answer 19

economic cooperation and coordination of economic policies between countries

Question 20

preferential trade agreements

Answer 20

countries agree to lower trade barriers on each other for certain goods and services

Question 21

bilateral trade agreement

Answer 21

preferential trade agreements only involving two countries

Question 22

multilateral trade agreement

Answer 22

preferential trade agreements involving multiple countries

Question 23

trading blocs

Answer 23

group of countries that have agreed to reduce trade barriers for free trade
- with different forms of agreement made by countries to increase trade between themselves and gain economic benefits

Question 24

free trade area

Answer 24

formed when two or more nations make an agreement to eliminate trade barriers on some goods and services only for member countries but no common trade policy on non-member countries

Question 25

customs union

Answer 25

member nations agree to reduce trade barriers on goods and services + common trade policies to non-member countries

Question 26

common market

Answer 26

member nations agree to reduce trade barriers on goods and services + common trade policies to non-member countries + free flow of factors of production for the member countries and further reduces trade barrier to promote free trade

Question 27

monetary union

Answer 27

members adopt a single currency and a common central bank

Question 28

convergence requirements

Answer 28

requirements to enter the third stage of economic and monetary union and use the same currency

Question 29

trade creation

Answer 29

benefits from creating more international trade when countries are joining the customs union

Question 30

trade diversion

Answer 30

cost of diverting from a lower cost foreign producer to a higher cost producer within the customs union

Question 31

debt servicing

Answer 31

the repayment of principal and the interest on the debt of a country