Vocabulary for A2 Revision Global Economy

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Here are some vocabulary you will need to know for the global economy (last economics paper) for ocr and other exam boards. good luck!

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  • Created on: 23-06-11 16:56
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Economics Vocabulary
Extract one
Purchasing Power Parity:
The exchange rate that equalizes the price of a basket of goods and services in two
countries. PPP is an attempt to measure the true value of a currency in terms of the
goods and services it will buy.
E.g £1= $2, then £1 of goods will buy the same goods bought for $2.
Reserve Currency:
A reserve currency is sometimes called an anchor currency and is a currency that
national governments and other institutions are happy to hold as a key part of their
foreign exchange reserves. It also acts as a global pricing currency for many
commodities such as gold, oil, wheat and copper.
Economic Integration:
Refers to the process of blurring the boundaries that separate that separate economic
activity in one nation state and another.
There are many different types of economic integration between countries
and these are summarised below. A free trade area is a fairly loose form of
integration where countries simply agree to remove tariff and non-tariff
barriers between them to promote free trade in goods and services. The
North American Free Trade Area (NAFTA) is a good example of this as is the
European Free Trade Area (EFTA). ASEAN (Association of South East
Nations), the Andean Pact, and Mercosur are other examples.
Stage of Economic No InternalCommon Factor and Asset Common Common
Integration Trade Barriers External Tariff Mobility Currency Economic Policy
Free Trade Area X
Customs Union X X
Single Market X X X

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Monetary Union X X X X
Economic Union X X X X X
Economic Monetary Union:
The deepest form on integration in which countries share the same currency and have a
common monetary policy as a result.
Monetary policy sovereignty:
The loss of monetary control a country faces when it gives up its own currency and
adopts a single currency eg the Euro, where centralised monetary decisions are made.
Economic cycle:
A natural cycle in fluctuations of GDP- icluding boom, slowdown, recession, recovery.…read more

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Extract Two
Economic Performance Indicators
­ Real GDP, Inflation Rate, Unemployment Levels and Balance of Payments; they all
provide a way of gauging the health and performance of an economy and give an
indication of what part of the economic cycle it is in
Real GDP
­ Gross Domestic Product adjusted for inflation
Competitiveness
How competitive a country's economy is with another's, this can be affected by
things such as relative labour unit costs, price of exports and quality of exported
goods
Labour Productivity
The…read more

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Fixed Exchange Rate
An exchange rate whereby the value of one currency expressed in terms of another
does not change between the two currencies
Floating Exchange Rate
An exchange rate whereby the value of one currency expressed in terms of another
varies with the forces of supply and demand for the currency
Single Currency
When an economically integrated area adopts a single common currency for use
between its member states
Depreciation
The decrease in the value of capital or a currency
Foreign Direct Investment (FDI)…read more

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Extract Three
Output Gaps
The difference between actual growth and the potential output of the economy
Welfare System
the system put in place and maintained by the government to support those who are
unemployed or have been employed but are retired
Economic/Trade/Business Cycle ­ phases (recovery, recession)
Fluctuations in the level of economic activity as measured by GDP; a recovery is the
upward sloping portion of the actual rate of growth line while a recession is the
downwards sloping part
Budget Deficit
The debt which…read more

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The Stability and Growth Pact of the EU is the set of criteria designed to maintain
economic convergence within the EU monetary union, it states that a government's
budget deficit must not exceed 3% of GDP and National Debt must not exceed 60%
of GDP, if these criteria are not met then the country in question will be penalised and
levied with a fine
Long Run Growth
Represented by a shift outwards in the LRAS, it shows an increase in the maximum
possible output of…read more

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Extract Four
World Trade Organisation (WTO)
A global organisation that regulates world trade. Has 150 members. Based in
Switzerland. Mission is "to help trade flow freely , smoothly, fairly and predictably".
This should create a trading system with the following characteristics:
· Non discriminatory
· Free trade
· Predictability
· Promoting fair competition
· Special provision for developing countries
Doha Round of Negotiations
Happened in 2001. Aimed at increasing the fairness towards trade with developing
countries to help them increase their on economic development.…read more

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Tariffs
A tariff is a tax that raises the price of imported products and causes a contraction in
domestic demand and an expansion in domestic supply. The net effect is that the
volume of imports is reduced and the government received some tax revenue from the
tariff.…read more

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Trade in Primary Non-Oil Commodities
Agricultural and minerals such as tobacco, lamb, beef, cotton, tin, copper
Access to Markets
How easily a firm can export goods and services. It is made easier with the reduction
of tariff and non tariff barriers.
Global GDP
Gross world product (GWP) is the total gross national product of all the countries in the
world. Form this a Global GDP Per Capita can be calculated.…read more

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