Economics Unit 3

Economics key terms.

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Key Terms

Globalisation- an expansion of world trade in goods and services leading to a greater international interdependence.

International trade- the exchange of goods and services across international borders.

Multinational Company- a compant who has operations all over the world.

Specialisation- being better than another country at providing a good or service, in terms of the quantity of output and lower cost.

Absolute Advantage- when a  ountry is able to provide a good or service using fewer resources and at a lower cost than another country.

Free trade- as absence of tariffs, quotas and regulations designed to reduce or prevent trade among nations.

Protection- where an action is taken that reduces international trade.

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Key Terms

Tariff- a tax placed on imports to increase the price and reduce the quantity demanded.

Quota- physical limit on the number of goods imported into a country. Either a percentage of the total market or a stated number.

Embargo- a ban on the import of a good or service

Regulations- a limit to an import of a good or service using a variety of rules.

Single Market- the economies of different countires can be treated as one when a firm is considering its domestic market.

Customs Union- a group of countries, such as the EU, have free trade between members, but a common external barrier.

Single Currency- a group of countries agree to adopt the same currency and to have one monetary policy.

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Key Terms

Current account- the balance of trade in goods and services plus net investment income from overseas assests.

Balance of trade in goods- the export of goods from the primary and secondary sector minus the import of these goods.

Balnce of trade in services- the export of tertiary sector sevices minus the import of these services.

A deficit- when your expenditure (outgoings) is more than your revenue (income).

A surplus- when your revenue is more than your expenditure.

Current account deficit- the value of imports exceeds the value of exports.

Current account surplus- the value of exports exceeds the value of imports.

Exchange rate- how much of one currency is needed to buy one unti on another currency.

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Key Terms

Floating exchange rate- where the prices of two currencies are decided by market forces.

Fixed exchange rate- where the central bank of a country tries to decide on the price of a currency.

International competitiveness- the ability of companies to compete with companies from other countries.

Competitiveness- the ability of a counrty to compete successfully internationally and maintain improvements in real output and wealth.

Foreign Direct Investment (FDI)- the investment by foreign companies in the production of goods and services in another country.

Absolute poverty- on a world basis defined as having less than $1.25 a day to live on.

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