F583 - The global economy - trade and integration

HideShow resource information
  • Created by: faatimah
  • Created on: 02-04-14 19:59
World Trade Organisation (WTO)
an international body responsible for negotiating trade agreements and 'policing the rules of trade to which its members sign ip/ Trade disputes between members are settles by the WTO
1 of 60
Absolute advantage
where one country is able to produce more of a good or service with the same amount of resources, such that the unit cost of production is lower
2 of 60
Reciprocal absolute advantage
where, in a theoretical world of two countries and two products each country has an absolute advantage in one of the two products
3 of 60
Comparative advantage
where one country produces a good or service at a lower relative opportunity than others
4 of 60
Relative opportunity cost
the cost of production of one good or service in terms of the sacrificed output of another good or service in one country relative to another
5 of 60
Terms of trade
the price of a country;s exports relative to the price of it's imports. The terms of trade can be measured using the formula
6 of 60
Factor endowments
mix of land, labour and capital that a country possesses. Factor endowments can be determined by, among other things, geography, historical legacy and economic and social development
7 of 60
Labour-intensive production
any production process that involves a large amount of labour relative to other factors of production
8 of 60
Capital-intensive production
where the production of a good or service requires a large amount of capital relative to other factors of production
9 of 60
Neckscher-Ohlin theory of international trade
a theory that a country will export products produced using factors of production that are abundant and import products whose production requires the use of scarce factors
10 of 60
Infant industries
industries in an economy that relatively new and lack the EoS that would allow them to compete in international markets against more established competitors in other countries
11 of 60
Profit margin
the difference between a firm's revenue and costs expressed as a percentage of revenue
12 of 60
Dynamic efficiencies
efficiencies that occur over time. International trade can lead to changes in behaviour over a period of time that can increase productive and allocative efficiency
13 of 60
Knowledge and technology transfer
the process by which knowledge and technology developed in one country is transferred to another, often through licensing and franchising
14 of 60
Licensing arrangements
an agreement that ideas and technology 'owned' by one company can be used by another, often for a charge
15 of 60
Regional trading bloc
countries in a region that have formed an 'economic club' based on abolishing tariffs and non-tariff barriers to trade
16 of 60
Primary commodities
goods produced in the primary sector of the economy (coffee and tin)
17 of 60
Prebisch-Singer-hypothesis
argument that countries exporting primary commodities will face declining terms of trade in LR = trapped them in low level of development as more & more exports will need to be sold to 'pay for' same volume of imports of 2dary sector/capital goods
18 of 60
Developed economies
countries with high income per capita and diversified industrial and tertiary sectors of the economy (USA, UK, Japan)
19 of 60
Developing economies
countries with relatively low income per capita, an economy which the industrial sector is small or underdeveloped and where primary sector production is relatively large part of total GDP
20 of 60
Liberalisation
reduction in barriers to international trade, in order to allow foreign firms to gain access to market for goods and services that are traded internationally
21 of 60
Intra-regional trade
trade between countries in the same geographical area (trade between UK and Germany or USA and Canada)
22 of 60
Inter-industry rate
trade involving exchange of goods and services produced by different industries
23 of 60
Intra-industry trade
trade involving exchange of goods and services produced by same industry
24 of 60
Freely floating exchange rate
a system whereby the price of one currency expressed in terms of another is determined by the forces of demand and supply
25 of 60
Fixed exchange rate
an exchange rate system in which the value of one currency has a fixed value against other countries. This fixed rate is often set by the government
26 of 60
Semi-fixed exchange rate
an exhange rate system that allows a currency's value to fluctuate within a permitted band of fluctuation
27 of 60
Foreign exchange market
a term used to describe the coming together of buyers and sellers of currencies
28 of 60
Short-term capital flows
flows of monet in and out of a country in the form of bank deposits. ST capital flows highly volatile and exist to take advantage of changes in relative interest rates
29 of 60
Long-term capital transactions
flows of money related to buying and selling of assets, such as land or property or production facilities (direct investment) or shares in companies (portfolio investment)
30 of 60
External economic shocks
unexpected events coming from outside the economy that cause unpredicted changes in AS or AD (rapid rises in oil prices or a global slowdown)
31 of 60
Purchasing power parity
the exchange rate that equalises the price of a basket of identical traded goods and services in two different countries. PPP is an attempt to measure the true value of a currency in terms of goods and services it will buy
32 of 60
Marshall-Lerner condition
for a depreciation of the currency to improve the balance of trade the sums of the price elasticities of demand (PEDs) for imports and ec
33 of 60
Futures markets
markets where people and businesses can buy and sell contracts to buy commodities or currencies at a fixed price at a fixed date in the future
34 of 60
Foreign currency reserves
foreign currencies held by central banks in order to enable intervention in the FOREX markets to affect the country's exchange rate
35 of 60
Bilateral exchange rate
exchange of one currency against another
36 of 60
Effective exchange rate
the exchange rate of one currency against a basket of currencies of other countries, often weighed according to the amount of trade done with each country
37 of 60
Single currency
a currency that is shared by more than one country. The euro is shared by 15 countries in the EU
38 of 60
Euro ara, eurozone
term to describe the combines economies of the countries using the euro
39 of 60
Expenditure-switching policies
policies that increase the price of imports and/or reduce the demand for imports and raise the demand for exports to correct a current account deficit on the balance of payments
40 of 60
Expenditure-reducing policies
policies that reduce the overall level of national income in order to reduce the demand for imports and correct a current account deficit on the balance of payments
41 of 60
Economic intregration
refers to the process of blurring the boundaries that separate economic activity in one nation state from that in another
42 of 60
Non-tariff barriers (NTBs)
things that restrict trade other than tariffs
43 of 60
Traed deflection
where one country in a free trade area imposes high tariffs on another to reduce imports but the imports come in from elsewhere in the free trade area
44 of 60
Free trade area
an agreement between two or more countries to abolish tariffs on trade between them
45 of 60
Customs union
an agreement between two or more countries to abolish tariffs on trade between them and to place a common external tariff on trade with non-members
46 of 60
Single market
deepens economic integration from a customs union by eliminating non-tariff barriers to trade promoting the free movement of labour and capital and agreeing common policies in a number of areas
47 of 60
Economic union
deepens integration in a single market, centralising economic policy at the macroeconomic level
48 of 60
Monetary union
the deepest form of integration in which countries share the same currency and have a common monetary policy as a result
49 of 60
Single-European MarKet (SEM)
a process adopted in the EU that promoted the free movement of goods, services and capital by harmonising product standards and removing remaining non-tariff barriers to trade
50 of 60
Monetary policy sovereignty
the ability of a country to pursue an independent monetary policy
51 of 60
Trade creation
where economic integration results in high-cost domestic production being replaced by imports form a more efficient source within the economically integrated area
52 of 60
Trade diversion
where economic integration results in trade switching from a low-cost supplier outside the economically integrated area to a less efficient source within the area
53 of 60
Transaction costs
the costs of trading, which includes costs of changing currencies
54 of 60
Price transparency
the ability to compare prices of goods and services in different countries
55 of 60
Stability and Growth pact
limits agreed to public sector borrowing and the national debt for those EU countries that are a part of the euro area
56 of 60
Automatic stabilisers
elements of fiscal policy that cushion the impact of the business cycle without any need for corrective action by the government. (higher spending unemployment benefits, welfare payments, lower taxation receipts = automatic fiscal stimulus
57 of 60
Fiscal transfers
occur where taxation raised in one country is used to fund government expenditures in another country
58 of 60
Economic convergence
process by which economic conditions in different countries become similar. Economists distinguish between monetary and real convergence. Membership of the euro area only requires monetary convergence to have taken place
59 of 60
Optimal currency area
conditions that need to be met to avoid the costs of monetary union; high degree of labour market flexibility, mechanisms for fiscal transfers and absence of external shocks that impact differently on different economies (asymmetric shocks)
60 of 60

Other cards in this set

Card 2

Front

where one country is able to produce more of a good or service with the same amount of resources, such that the unit cost of production is lower

Back

Absolute advantage

Card 3

Front

where, in a theoretical world of two countries and two products each country has an absolute advantage in one of the two products

Back

Preview of the back of card 3

Card 4

Front

where one country produces a good or service at a lower relative opportunity than others

Back

Preview of the back of card 4

Card 5

Front

the cost of production of one good or service in terms of the sacrificed output of another good or service in one country relative to another

Back

Preview of the back of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Globalisation and trade resources »