T4.1.1 - 4.1.5: International Economics P1

Question 1

What is Containerisation?

Answer 1

A system of freight transport for use in sea shipping that has reduced the transport costs of shipping many thousands of different goods across the globe.

Question 2

What is a Closed economy?

Answer 2

An economy operating without imports and exports, i.e. closed to global trade.

Question 3

What is Deglobalisation?

Answer 3

The process of diminishing interdependence and integration between economies around the globe.

Question 4

What is Foreign direct investment (FDI)?

Answer 4

FDI is the acquisition of a controlling interest in productive operations abroad by businesses resident in the home economy. May involve the creation of new productive capacity such as a new factory or building of infrastructure.

Question 5

What is Globalisation?

Answer 5

The deepening of relationships between countries of the world reflected in an increasing level of cross-border trade and investment and migration.

Question 6

What is Mercantilism?

Answer 6

The notion that the wealth of a nation was based on how much it could export in excess of its imports, and thereby accumulate precious metals.

Question 7

What are Multinational companies (MNCs)?

Answer 7

A MNC has facilities and other assets in at least one country other than its home country.

Question 8

What is an Open economy?

Answer 8

An economy with low tariff and non-tariff barriers which is deeply integrated into the regional and global economy.

Question 9

What are Transnational companies (TNCs)?

Answer 9

TNCs base their manufacturing, assembly, research and retail operations in a number of countries.

Question 10

What is Absolute advantage?

Answer 10

Occurs when a country can produce a product using fewer resources than another nation.

Question 11

What is Comparative advantage?

Answer 11

Refers to the relative advantage that one country or producer has over another.

Question 12

What are Dynamic gains from trade?

Answer 12

Dynamic gains from trade make a domestic economy more productive.

Question 13

What is Fairtrade?

Answer 13

Trade between companies in developed countries and producers in developing countries in which fair prices are paid to the producers.

Question 14

What is Free trade?

Answer 14

When trade in goods and services between nations is allowed to occur without any form of import restriction.

Question 15

What are Relative export prices?

Answer 15

A country’s export prices relative to those of a competing economy.

Question 16

What is Specialisation?

Answer 16

When individuals, regions or countries concentrate on making one product to create a surplus to trade.

Question 17

What is Trade creation?

Answer 17

Occurs when a country enters a free trade area/agreement or becomes involved in a customs union in which there is free trade between members but also a common external tariff.

Question 18

What is Trade diversion?

Answer 18

A feature of a country deciding to join a customs union, switching from a lower-cost foreign source/supplier outside of a customs union towards a higher-cost supplier located inside the customs union.

Question 19

What is a Bilateral trade agreement?

Answer 19

An agreement to lower import tariffs and other trade barriers between two countries.

Question 20

What is Competitiveness?

Answer 20

External competitiveness is the sustained ability to sell goods and services profitably at competitive prices in a foreign country.

Question 21

What is an Exchange rate?

Answer 21

The external value of a currency.

Question 22

What is Intra-regional trade?

Answer 22

The exchange of virtually identical products between countries within the same region.

Question 23

What is a Trading bloc?

Answer 23

A group of countries co-operating to liberalize trade between each other.

Question 24

What is the Prebisch-Singer Hypothesis?

Answer 24

An observation that states that the terms of trade between primary goods and manufactured products deteriorate over time.

Question 25

What are Terms of Trade?

Answer 25

The real value of countries exports in terms of their imports.

Question 26

What are Anti-dumping tariffs?

Answer 26

Import tariffs allowed under World Trade Organisation rules when cases of dumping have been established.

Question 27

What is ASEAN?

Answer 27

Association of Southeast Asian Nations - a regional trade bloc.

Question 28

What is a Common External Tariff (CET)?

Answer 28

An import tariff applied equally by each country participating in a customs union.

Question 29

What is a Common market?

Answer 29

A single market providing for participating countries free trade in goods and services and free movement of labour and capital.

Question 30

What is a Customs union?

Answer 30

A group of countries that abolish tariffs and quotas between member nations to encourage free movement of goods and services.

Question 31

What is the European Free Trade Agreement (EFTA)?

Answer 31

European Free Trade Association consists of Norway, Iceland, Switzerland and Liechtenstein.

Question 32

European Union eurozone

Answer 32

As of January 2017, there are twenty-eight member nations of the EU –
collectively known as EU28. The UK voted to leave the EU in June 2016.

Question 33

Eurozone

Answer 33

The consists of those member states of the EU that use the Euro as their currency.

Question 34

Free trade area (FTA)

Answer 34

A free trade area (FTA) is one where there are no tariffs or taxes or quotas
on goods and/or services from one country entering another.

Question 35

Monetary union

Answer 35

An intergovernmental agreement that involves two or more states sharing
the same currency.

Question 36

NAFTA

Answer 36

North American Free Trade Agreement - a free trade area agreement
signed by the US, Canada and Mexico. This has now been replaced by the
USMCA agreement.

Question 37

Non-tariff barrier

Answer 37

Trade barriers such as import quotas, embargoes and export subsidies.

Question 38

Pacific alliance

Answer 38

Trade agreement between Chile, Colombia, Mexico and Peru.

Question 39

Regional trade agreement

Answer 39

An agreement to lower import tariffs and other trade barriers between
countries in a certain region.

Question 40

SAFTA

Answer 40

South Asian Free Trade Area comprising Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

Question 41

Schengen area

Answer 41

26 country passport-free area inside Europe.

Question 42

Single market

Answer 42

A single market represents a deeper form of economic integration than a customs union. It involves the free movement of goods and services,capital and labour.

Question 43

Trade liberalisation

Answer 43

Reductions in import tariffs and non-tariff barriers to enhance trade
between one or more countries.

Question 44

Trading bloc

Answer 44

A group of countries co-operating to liberalize trade between each other.

Question 45

Transition economies

Answer 45

Former countries of the Eastern Bloc that have been engaged in a transition from being largely command economies to market systems with a
greater role for private enterprise and resource allocation via the price mechanism.

Question 46

World trade organisation

Answer 46

The WTO polices free trade agreements and decides on trade disputes between countries. It arranges trade negotiations to liberalize trade for member countries by mutually agreed reductions in tariffs & quotas and opening domestic markets up to foreign competition.