International economic issues (A level) Flashcards
Net errors and omissions
a figure included to ensure the balance of payments balances; sometimes called the balancing item
Expenditure switching policy
policy tools designed to encourage people to switch from buying foreign-produced products to buying domestically produced products
Expenditure reducing policy
policy tools designed to reduce imports and increase exports by reducing demand
Real exchange rate
a currency’s value in terms of its real purchasing power
Trade-weighted exchange rate
the price of one currency against a basket of currencies
Fixed exchange rate
an exchange rate set by the government and maintained by the central bank
Devaluation
a decision by the government to lower the international price of the country’s currency
Revaluation
a decision by the government to raise the international price of the country’s currency
Managed system
where the exchange rate is influenced by state intervention
Marshall-Lerner condition
the requirement that for a fall in the exchange rate to be successful in reducing a current account deficit, the sum of the price elasticities of demand for exports and imports must be greater than 1
J curve effect
a fall in the exchange rate causing an increase in a current account deficit before it reduces it due to the time it takes for demand to respond
Poverty cycle
the links between, for example, low income, low savings, low investment and low productivity
Development traps
restrictions on the growth of developing economies that arise from low levels of savings and investment
Purchasing power parity (PPP)
a way of comparing international living standards by using an exchange rate based on the amount of each currency needed to purchase the same basket of goods and services
Measurable Economic Welfare (MEW)
a composite measure of living standards that adjusts GDP for factors that reduce living standards and factors that improve living standards
Multidimensional Poverty Index (MPI)
a composite measure of deprivation in terms of the proportion of households that lack the requirements for a reasonable standard of living
Kuznets curve
a curve that shows the relationship between economic growth and income inequality
Shadow economy
the output of goods and services hidden from the authorities
Demographers
people who study changes in the structure of human populations
Birth rate
the number of live births per thousand of the population in one year
Death rate
the number of deaths per thousand the population in one year
Infant mortality rate
the number of deaths of children aged under one per thousand live births in one year
Net migration
the difference between immigration and emigration
Natural increase in population
the number of live births exceeding the number of deaths
Positive net migration
more people coming to live in the country than people leaving the country to live elsewhere. It can also be referred to as net immigration
Net migration rate
the number of migrants per thousand of the population in one year
Dependency ratio
the proportion of the economically inactive compared to the labour force
Optimum population
the size of population that maximises GDP per head
Lorenz curve
a diagram illustrating the extent of income or wealth inequality
Primary sector
industries involved in farming and extracting natural resources
Secondary sector
industries that manufacture products
Tertiary sector
industries that produce services
International Monetary Fund (IMF)
an international organisation that promotes free trade and helps countries in balance of payments difficulties
Aid
assistance given to other countries on favourable terms
Tied aid
aid with conditions attached
Untied aid
aid without conditions attached
Bilateral aid
aid given by one country to another country
Multilateral aid
aid given by international organisations to a country or countries
Virtuous cycle
the links between, for example, an increase in investment, increase in productivity, increase in income and increase in saving
Emerging economies
economies that are making quick progress towards becoming high-income economies
Foreign direct investment (FDI)
the setting up of production units or the purchase of existing production units in other countries
Globalisation
the process by which the world is becoming increasingly interconnected through trade and other links
Trade bloc
a regional group of countries that have entered into trade agreements
Free trade area
a trade bloc where member governments agree to remove trade restrictions among themselves
Customs Union
a trade bloc where there is free trade between member countries and a common external tariff on imports from non-members
Monetary union
a trade bloc which involves member countries operating the same currency, having one exchange rate and the same interest rate
Full economic union
a trade bloc where there is free trade between member countries, a common external tariff, common economic policies and the same currency.
Trade creation
where high-cost domestic production is replaced by more efficiently produced imports from within the customs union
Trade diversion
where trade with a low-cost country outside a customs union is replaced by higher-cost products supplied from within the customs union
