The Global Economy Flashcards
It refers to a system that forms rules and standards
for facilitating international trade among the nations.
International Monetary Systems (IMS)
It helps in reallocating the capital and investment from one nation to another.
International Monetary Systems (IMS)
It is the global network of the government and financial institutions that determine the
exchange rate of different currencies and set rules by which different nations exchange
currencies for international trade.
International Monetary Systems (IMS)
In 1870 to 1914, with the help of _______ and _______, trade was carried without any
institutional support. Monetary system during that time was _________ while market
based and money played a minor role in international trade in contrast to gold.
gold
silver
decentralized
___________ functioned as a fixed exchange rate regime, with gold as the only
international reserve.
Gold standard
____________ is a system of backing a country’s currency with its gold reserves. Such
currencies are freely convertible into gold at a fixed price, and the country settles all its
international trade transactions in gold.
Gold Standard
After ________, the use of gold declined due to increased expenditure and inflation
which were caused by war. Major economic powers were on gold standards but could not
maintain it and failed because of the _____________ in 1929.
World War I
Great depression
the aim of which is to create a stabilized international currency system and
ensure a monetary stability for all the nations.
Bretton Woods system
In 1944, 730 representatives of 44 nations met at ___________, ________, _________ to create a new international monetary system called as the Bretton Woods
system.
Bretton Woods
New Hampshire
United States
In 1944, ____ representatives of ___ nations met at Bretton Woods, New Hampshire, United
States to create a new international monetary system called as the Bretton Woods
system,
730
44
Since the United States held most of the world’s gold, all the nations would determine
the values of their currencies in terms of _________. The central banks of nations were given
the task of maintaining fixed exchange rates with respect to _________ for each currency.
dollar
dollar
In 1973, the ___________________, also known as flexible exchange rate system
was developed that was market based.
floating exchange rate system
In 1973, the floating exchange rate system, also known as _________________
was developed that was market based.
flexible exchange rate system
______________________ refers to a 30-year long process that began at the end of the 1960s as a form of monetary cooperation intended to reduce the excessive influence of the __________ on domestic exchange rates, and led, through various attempts, to the creation of a Monetary Union and a ________________. This Union brings many benefits
to Member States.
European monetary integration
US dollar
common currency
It is a 1979 arrangement between several
European countries which links their currencies in an attempt to stabilize the exchange
rate.
The European Monetary System (EMS)
EMS was succeeded by the ______________, an institution of the European Union (EU).
European Economic and Monetary Union
(EMU)
In June 1998, the European Central Bank was established and, in January 1999, a unified
currency, the _____, was born and came to be used by most EU member countries.
euro
According to the European Commission, the first ten years of the EMU were an evident
success for participating countries in terms of increased trade and capital transactions,
more integrated economies, and the utilization of ________ as the second most widely used
reserve currency.
Euro
But in 2008 to 2009, ___________________ is presented with dramatic challenges brought by global financial
and economic crisis.
EU european union
The EU in 2010 in response to the crisis, enacted the three-pillar financial rescue program
which includes: the _____________________, the _________________, and the _________________. The future
of EMU depends on the willingness of member states to agree on more fundamental
changes in the governance of ____________.
European Financial Stability Mechanism
European Financial Stability Facility
Financial assistance of International Monetary Fund
Eurozone
It is a permanent fund to
provide emergency assistance to member states within the Union.
The European Financial Stabilisation Mechanism (EFSM)
It is an organization which aids member
states with unstable economies.
The European Financial Stability Facility (EFSF)
The __________ is a special purpose vehicle (SPV) managed by
the European Investment Bank, a lending institution. The fund raises money by issuing
debt, and distributes the funds to eurozone countries
The European Financial Stability Facility (EFSF)
It is an international financial institution,
formed in July 1944, at the Bretton Woods Conference, and is now headquartered in
Washington, D.C.
The International Monetary Fund (IMF)
It consists of 190 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and reduce poverty around the world
while periodically depending on the World Bank for its resources.
The International Monetary Fund (IMF)
It is the exchange of goods, services and capital across national
borders.
International trade
It is central to the Gross Domestic Product (GDP) of many countries, and is the
only way for people in countries to acquire resources.
International trade
The economy of the world is also affected by the exchange of goods as dictated by ______________, making goods and services obtainable which may not be available globally
to consumers.
supply and demand
Two key concepts in the economics of international trade
comparative advantage
specialization
(so long as the two countries have different relative efficiencies, the two can benefit from trade).
Comparative advantage
(countries as well as individual businesses can maximize their welfare by
specializing in the production of those goods where they are most efficient and enjoy the
largest advantages over rivals)
specialization
Two Types of Economies in International Trade
Protectionism
Trade Liberalization
Policy of protecting local industries against foreign competition by means of trade barriers
Protectionism
measures that governments introduce to make imported goods
or services less competitive than locally produced goods and services, e.g. tariffs,
embargoes, and quotas
trade barriers
removal or reduction of restrictions or barriers on the free exchange of goods between nations
trade liberalization
Types of Trade Policies
National Trade Policy
Bilateral Trade Policy
International Trade Policy
It safeguards the best interest of its trade and citizen.
National Trade Policy
It regulates the trade and business relations between two nations,
this policy is formed.
Bilateral Trade Policy
Under the trade agreement, the _____________ of both the nations and their negotiations are considered while ____________ is being
formulated.
national trade policies
bilateral trade policy
It defines the international trade policy under their charter like the International economic organizations, such as World Trade Organization (WTO) and
International Monetary Fund (IMF). The best interests of both developed and developing
nations are upheld by the policies.
International Trade Policy
T or F:
In most developed countries where open market economy prevails, the international
economic organizations support free trade policies.
T
T or F:
In most developed countries where open market economy prevails, the international
economic organizations do not support free trade policies.
F (support)
T or F:
In the case of developing nations partially-shielded trade practices are preferred to
protect their local trade industries
T
T or F:
In the case of developing nations partially-shielded trade practices are preferred to
protect their international trade industries
F (local trade industries)
