theme 4

Question 1

globalisation

Answer 1

An expansion of world trade in goods and services leading to
greater international interdependence.

Question 2

interdependence

Answer 2

When countries become reliant on each other. Their economies are closely linked through trade, production, finance and migration.

Question 3

containerisation

Answer 3

Technology of massive ship containers to transport goods. A cause
of globalisation through lowering transport costs.

Question 4

ICT

Answer 4

Information and Communications Technology (Internet) which has
reduced the cost of communication and to almost zero.

Question 5

specialisation

Answer 5

When a person, firm or country concentrates on doing one thing.

Question 6

absolute advantage

Answer 6

The ability to produce a good or service at a lower cost or with
fewer resources than your competitors.

Question 7

comparative advantage

Answer 7

The ability to produce a good or service at a lower opportunity cost than your competitors.

Question 8

terms of trade

Answer 8

The ratio of export prices to import prices.

(X price index / M price index)*100

Question 9

balance of payments

Answer 9

A set of accounts showing the transactions between residents of a
country and the rest of the world – sets out exports, imports and flows
of money. The Balance of Payments has two parts – the Current
Account, and the Capital or Financial Account.

Question 10

current account

Answer 10

a) the value imports and the value of exports of goods and services
b)
net income payments received from/paid to abroad and
c) government
transfers (international aid to developing countries or money we pay to
the EU).

Question 11

financial/ capital account

Answer 11

Financial Account includes any trade of Foreign Exchange reserves as
well as the buying and selling of assets held in different countries. If
the current account is a deficit, the financial account will be a surplus.

Question 12

balance of trade

Answer 12

Value of Exports minus the value of imports of physical goods as well as
invisible services.

Question 13

global imbalances

Answer 13

The spread of trade balances is very unequal – Britain & the USA are
running huge current account deficits whilst China, Russia, Germany
and middle eastern oil states are running massive surpluses.

Question 14

trading bloc

Answer 14

A group of countries who agree some level of Free Trade (international
trade without restrictions) between them.

Question 15

free trade area

Answer 15

A group of countries who abolish tariffs and quotas to allow the free
movement of goods between them. The North American Free Trade
Area (NAFTA) is a good example – including the USA, Canada and
Mexico.

Question 16

common (or single) market

Answer 16

A Free Trade Area which also has free movement of services and
factors of production (land, labour, capital, profits) between members,
using harmonised rules. Example: The EU.

Question 17

custom union

Answer 17

A Free Trade area or Customs Union with a common external trade
policy – all the countries have the same tariffs against external
countries outside the bloc. Example: The EU.

Question 18

single currency area

Answer 18

A trading bloc which adopts a single currency between nations in order
to encourage price transparency and increase trade.

Question 19

the european union

Answer 19

The World’s largest trading bloc – a single market and customs Union
for 27 nations (including the UK till 2019). Also contains a large single
currency area.

Question 20

the eurozone

Answer 20

The single currency area within the EU. Contains 18 countries.

Question 21

world trade organisation

Answer 21

The World trade Organisation. International organisation founded in
1995 to encourage free trade between its members and handle trade
disputes between them.

Question 22

GATT

Answer 22

General Agreement on Tariff and Trade. The predecessor to the WTO.

Question 23

protectionism

Answer 23

When countries try to reduce the amount of imports they receive.
This could be to protect their own industries or workers. The main
methods are Tariffs, Quotas and regulations.

Question 24

tariffs

Answer 24

indirect taxes on imports

Question 25

quotas

Answer 25

a physical limit on the amount of imports allowed

Question 26

regulations/
non tariff barriers

Answer 26

Rules and regulations which have been deigned to raise the cost of
imports or deter foreign firms from exporting to your country.