HSC Topic One: The Global Economy. Flashcards
Global economy
Where the economies of individual countries are linked to each other and changes in a single economy can have ripple effects on the others.
Gross World Product (GWP)
refers to the sum of the total output of goods and services by all economies in the world over a period of time.
Globalisation
refers to the integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity.
Direction of trade
Direction of trade refers to the study of the countries to whom the exports are made and from whom the imports are made.
Foreign exchange markets
refers to the market in which currencies are traded.
Speculators
Investors who buy or sell financial assets with the aim of making profits from short term price movements.
The International Monetary Fund (IMF)
An international agency that consists of 190 members and oversees the stability of the global financial system. The major functions of the IMF are to ensure stability of exchange rates, exchange rate adjustment and convertibility.
Foreign direct investment (FDI
Refers to 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% 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
Transnational corporations (TNCs)
TNC’s are global companies that dominate global product and factor markets. TNC’s have production facilities in at least 2 countries and are owned by residents of at least 2 countries.
International division of labour
How the tasks in the production process are allocated to different people in different countries around the world.
World Trade Organisation
An organisation of 164 member countries that implements and advances global trade agreements and resolves trade disputes between nations
Foreign Exchange Markets
The foreign exchange market is an over-the-counter (OTC) marketplace that determines the exchange rate for global currencies
Labour Markets
The labor market refers to the supply of and demand for labor
International. business cycle.
refers to fluctuations in the level of economic activity in the global economy over time
Infant industries
a new industry, which in its early stages experiences relative difficulty or is absolutely incapable in competing with established competitors abroad.
Protection
refers to the government policies that give domestic producers an artificial advantage over foreign competitors
Free trade
a situation where governments impose no artificial barriers to trade that restrict the free exchange of goods and services between countries with the aim of shielding domestic producers from foreign competitors.
Comparative Advantage
The economic principle that nations should specialise in the areas of production in which they have the lowest opportunity cost, and trade with other nations so as to maximise standards of living
Dumping
The practice of exporting goods to a country at a price lower than their selling price in their country of origin.
Tariff
A government imposed tax on imports.
-Raises price on imported good making the domestic producer more competitive.
Qouta
Refer to restrictions on the amounts or values of various kinds of goods that may be imported.
Subsidy
Subsidies involve financial assistance to domestic producers, which enables them to reduce their selling price and compete more easily with overseas producers.
- Shifts the supply curve outwards
Local content rules
Rules which specify that goods must contain a minimum percentage of locally made parts.
Export incentives
Give domestic producers assistance such as grants, loans or technical advice and thus encourage businesses to penetrate global markets or expand their market share.
Free trade agreement
formal agreements between countries designed to break down trade barriers between those nations.
Bilateral trade agreement
trade agreement with 2 countries
Multilateral trade agreement
Trade agreement with 2 or more countries
Trade bloc
Occurs when a number of countries join together in a formal preferential trading agreement.
Trade Diversion
When trade is diverted from a more efficient exporter towards a less efficient one by the formation of a free trade agreement or a customs union.
Trade Liberalisation
Trade liberalisation refers to the removal or reduction of restrictions or barriers on the free exchange of goods between nations.
Absolute advantage
The principle of absolute advantage is the ability of a party (an individual, or firm, or country) to produce a good or service more efficiently than its competitors.
Brain Drain
Refers to a substantial emigration or migration of individuals out of a country. It can result from turmoil, the existence of favorable professional opportunities in other countries, or a desire to seek a higher standard of living.
