IB Economics SL Global Economy

Economies of scale

More is cheaper

Trade protection/protectionism

Using trade barriers like tariffs and quotas to protect domestic businesses

Tariff

Tax on imports

Quota

Limit on amount of a good imported

Export subsidy

Government funding that makes exports cheaper

Infant industry

New industry that needs trade protection to survive

National security

Ensuring a country has the resources to prevent and defend against attacks

Dumping

Subsidizing exports to undercut competition

Economically least developed countries (ELCD)

Poorest countries, HDI below .55

Diversification

Having a variety of industries

Preferential trade agreement

Increasing trade between countries by limiting tariffs

Bilateral

Between two countries

Multilateral

Between many countries

World Trade Organization

Promotes trade by keeping tariffs low between 166 countries

Free trade area/agreement

Eliminates tariffs between members (US MCA, EU)

Customs union

Common external trade policy

All members agree to trade agreements with other countries

Common market

Workers are free to cross the border

Sovereignty

A country’s control over its economy

Monetary union

Countries with same currencies

Foreign exchange

Other countries currencies

Floating exchange rate rates

Value of currency changes with global demand

Appreciation/depreciation

Rise/fall of currency value

Foreign direct investment (FDI)

Starting and running a business overseas

Portfolio investment

Buying stocks and bonds

Remittance

Sending money to other people and other countries

Speculation

Buying currency, or any assets, with the expectation that it will rise in the future

Fixed exchange rate

Using heavy Central Bank intervention to keep a currency at the same price

Overvalued/undervalued currency

When a currency has not adjusted to its equilibrium level

Balance of payments

Money flows in and out of the country

Current account

Trade in goods and services, remittances, and transfers

Capital account

Non-produced assets

Land, natural resources

Financial account

FDI, And other investments - Change in foreign reserves

Foreign reserves/reserve asset

Foreign currency is held in a bank

Sustainable development

Improvement in equality of life with an eye on the future

Human development index

Composite index, including income, life expectancy, mean and expected years of schooling

Gender inequality index

Measures women’s healthcare, labor, force, participation, and empowerment

Inequality adjusted HDI

HDI with inequality included

Poverty trap/poverty cycle

Poverty is a self reinforcing problem and needs intervention to fix it

Primary sector production

Farming, mining

Capital flight

Investment stop flowing to a country, investors leave

Corruption

Government officials serving own interests

Trade Liberalization

Moving towards free trade, no tariffs

Import substitution

Protectionist policy to spur industrialization in a country

Official development assistance

For an aid from government

Non-governmental organizations

Not for profit agencies, such as doctors without borders, Red Cross

International monetary fund

Development Institute that provides money to financially struggling countries

World bank

Provides money to countries for development project

Micro finance

Small loans to help entrepreneurs/farmers who otherwise don’t qualify