IB Economics SL Global Economy

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48 Terms

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Economies of scale

More is cheaper

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Trade protection/protectionism

Using trade barriers like tariffs and quotas to protect domestic businesses

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Tariff

Tax on imports

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Quota

Limit on amount of a good imported

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Export subsidy

Government funding that makes exports cheaper

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Infant industry

New industry that needs trade protection to survive

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National security

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

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Dumping

Subsidizing exports to undercut competition

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Economically least developed countries (ELCD)

Poorest countries, HDI below .55

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Diversification

Having a variety of industries

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Preferential trade agreement

Increasing trade between countries by limiting tariffs

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Bilateral

Between two countries

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Multilateral

Between many countries

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World Trade Organization

Promotes trade by keeping tariffs low between 166 countries

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Free trade area/agreement

Eliminates tariffs between members (US MCA, EU)

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Customs union

Common external trade policy

All members agree to trade agreements with other countries

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Common market

Workers are free to cross the border

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Sovereignty

A country’s control over its economy

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Monetary union

Countries with same currencies

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Foreign exchange

Other countries currencies

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Floating exchange rate rates

Value of currency changes with global demand

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Appreciation/depreciation

Rise/fall of currency value

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Foreign direct investment (FDI)

Starting and running a business overseas

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Portfolio investment

Buying stocks and bonds

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Remittance

Sending money to other people and other countries

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Speculation

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

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Fixed exchange rate

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

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Overvalued/undervalued currency

When a currency has not adjusted to its equilibrium level

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Balance of payments

Money flows in and out of the country

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Current account

Trade in goods and services, remittances, and transfers

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Capital account

Non-produced assets

Land, natural resources

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Financial account

FDI, And other investments - Change in foreign reserves

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Foreign reserves/reserve asset

Foreign currency is held in a bank

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Sustainable development

Improvement in equality of life with an eye on the future

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Human development index

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

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Gender inequality index

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

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Inequality adjusted HDI

HDI with inequality included

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Poverty trap/poverty cycle

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

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Primary sector production

Farming, mining

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Capital flight

Investment stop flowing to a country, investors leave

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Corruption

Government officials serving own interests

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Trade Liberalization

Moving towards free trade, no tariffs

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Import substitution

Protectionist policy to spur industrialization in a country

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Official development assistance

For an aid from government

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Non-governmental organizations

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

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International monetary fund

Development Institute that provides money to financially struggling countries

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World bank

Provides money to countries for development project

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Micro finance

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