Global Economy and Globalisation – Key Terms

Vocabulary flashcards covering key terms from the lecture notes on the global economy and globalisation.

Global economy

The integrated world economy with flows of goods, services, capital, labor, technology and ideas across borders.

International economic integration

Lowering barriers to trade to create a connected market for resources, capital and goods/services.

GWP (Gross World Product)

The total value of goods and services produced worldwide in a period, calculated by summing national GDPs on a PPP basis.

Purchasing Power Parity (PPP)

Rates of currency conversion that equalise the purchasing power of different currencies by adjusting for domestic price levels.

PPP-adjusted GDP

GDP adjusted for differences in price levels so comparisons reflect living standards across countries.

Globalisation

Increased integration and interdependence of economies over time, aided by technology, transportation, communication and international organisations.

FDI (Foreign Direct Investment)

Investment in productive assets in another country; a key component of international financial flows and often led by TNCs.

Transnational corporations (TNCs)

Firms with international operations and dispersed, decentralised structures that operate across borders.

International division of labour (IDL)

Distribution of production tasks across the world, leading to cheaper goods but potential structural unemployment.

Offshoring

Relocating production to another country to lower costs.

Brain drain

Migration of skilled workers from developing to advanced economies, reducing source-country skills.

Remittances

Money sent home by migrants to family in their country of origin.

International business cycle

Fluctuations in world output (GWP) and the synchronization of growth across countries.

Synchronization

When economic cycles in different countries move in the same direction due to global integration.

Regional business cycle

GDP growth variation within a region that can diverge from the global cycle.

Gravity model of trade

Trade is influenced by the proximity and size of economies—the closer and larger, the more trade.

Free trade agreement (FTA)

An agreement between countries to reduce or eliminate barriers to trade in goods and services.

Trade bloc

A group of countries that have reduced protection against each other to varying degrees.

Preferential trade agreements

Trade deals that reduce barriers for member countries, but not necessarily for non-members.

Customs union

A trade bloc with a common external tariff and free movement of goods among members.

Common market

A trade bloc with free movement of goods, services, capital and labour.

Economic union

A type of integration with common policies and typically a shared currency and institutions.

Monetary union

A union where member countries share a single currency and common monetary policy.

Tariffs

Taxes on imported goods.

Quotas

Limits on the quantity or value of imports allowed.

Local content rules

Rules requiring a proportion of inputs to be produced domestically.

Subsidies

Payments to domestic producers to lower costs and boost production.

Export incentives

Tax breaks or subsidies to encourage exporting.

Infant industry protection

Temporary protection of new industries to help them achieve scale and competitiveness.

Dumping

Exporting goods at or below production cost or home market price to gain market share.

Protection (protectionism)

Barriers or policies used to shield domestic industries from foreign competition.

WTO (World Trade Organization)

International body that promotes and enforces global trade rules and negotiations.

GATT

General Agreement on Tariffs and Trade; predecessor to the WTO focused on goods trade.

Doha Round

WTO negotiation round (2001–present) aiming to improve access for developing country exports and reduce protection in advanced economies.

IMF

International Monetary Fund; aims to maintain international financial stability and provide emergency lending with conditions (structural adjustment).

Structural adjustment

Policy conditions attached to IMF lending intended to restore macroeconomic stability and growth.

World Bank

International organisation funding development projects to reduce poverty and promote growth; offers loans, grants, and policy advice.

United Nations (UN)

International organisation promoting peace, security, development and human rights; hosts General Assembly and main organs like the Security Council and ECOSOC.

Security Council

UN body of 15 members that can authorize sanctions and other measures to maintain international peace.

ECOSOC

UN body coordinating international development efforts, environment, governance and social issues.

OECD

Organisation for Economic Cooperation and Development; 36 member countries promoting policy analysis, data and proposals to improve economic policy.

G20

Group of 20 including 19 countries plus the EU; discusses macroeconomic and trade issues and coordinates policy.

G7 (G7/G8)

Group of major advanced economies meeting to discuss macroeconomic and other policy issues.

HDI (Human Development Index)

Composite index measuring income, education and life expectancy to assess development.

Gini coefficient

A measure of income or wealth distribution; 0 = perfect equality, 1 = maximal inequality.

Real GNI

Real gross national income; real GDP plus net income receipts, adjusted for price levels.

Sustainable Development Goals (SDGs)

17 UN goals adopted in 2015 to guide global development efforts through 2030.

Least-developed country (LDC)

Low-income country facing severe structural impediments to development.

Middle-income trap

When an economy’s manufacturing growth stalls as it shifts to services and fails to reach advanced status.

Resource curse

Abundance of natural resources linked to corruption and poor governance, hindering development.

Environmental Kuznets Curve

Hypothesis that environmental degradation rises with income at first, then falls as wealthier countries invest in cleaner technologies.

Dematerialisation

Wealthier economies reduce material inputs per unit of output, often shifting towards services.

Environmental sustainability

Maintaining natural resources and ecosystems while pursuing economic growth; globalization can strain or improve sustainability depending on policies.

Real income comparisons (PPP-adjusted)

Comparing incomes across countries using PPP adjustments to reflect true purchasing power.

Globalisation’s effect on environment

Production shifts to countries with lower environmental standards, potentially worsening global sustainability unless mitigated.