global definitions Flashcards
inflation
sustained increase in general price level
deflation
sustained decrease in general price level
fdi
physical investment in the hosting economy done by foreign multi-national corporations with at least 10% ownership
exchange rate
value of a currency in terms of another currency
current account
financial records recounts all money inflow and outflow between local economy and foreign economy in visible trade, invisible trade, income flow and current transfer
depreciation
decrease in the VALUE of a currency in terms of another currency under floating exchange rate system
appreciation
increase in the VALUE of a currency in terms of another currency under floating exchange rate system
devaluation
decrease in the value of a currency in terms of another currency under fixed exchange rate system
revaluation
increase in the value of a currency in terms of another economy under fixed exchange rate system
circular economy
an economy that recycle, reuses and promotes environmental sustainability
humanitarian aid
financial assistance from foreign economy to help emergency needs for improving basic necessities for human under disaster or war
debt servicing
use the government revenue to finance or repay the debt or loan by the domestic government to the bank or foreign government
tariff
tax on imported goods and services
import quota
limit on the quantity on imported goods are allowed to import
administrative barrier
trade barriers to reduce import by non-tariffs and quota means, eg control on quality, increase inspection
trade war
countries impose trade barriers to each other
overvalued currency
- 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
undervalued currency
- value it too low relative to its equilibrium free market value
- exchange rate is low relative to the one the market would have determined
economic integration
economic cooperation and coordination of economic policies between countries
preferential trade agreements
countries agree to lower trade barriers on each other for certain goods and services
bilateral trade agreement
preferential trade agreements only involving two countries
multilateral trade agreement
preferential trade agreements involving multiple countries
trading blocs
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
free trade area
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
customs union
member nations agree to reduce trade barriers on goods and services + common trade policies to non-member countries
common market
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
monetary union
members adopt a single currency and a common central bank
convergence requirements
requirements to enter the third stage of economic and monetary union and use the same currency
trade creation
benefits from creating more international trade when countries are joining the customs union
trade diversion
cost of diverting from a lower cost foreign producer to a higher cost producer within the customs union
debt servicing
the repayment of principal and the interest on the debt of a country
