4.1. International Economics

Globalisation

The growing interdependence of countries and the rapid rate of change it brings about, characterized by the integration of local, regional, and national economies into a single international market.

OECD

The Organisation for Economic Co-operation and Development, which defines globalisation as the geographic dispersion of industrial and service activities.

TNCs

Transnational Corporations, large companies operating around the world that contribute to globalisation by seeking profit through low labor costs and international production.

Comparative Advantage

The theory that countries can benefit from trade by specializing in the production of goods for which they have a lower opportunity cost.

Absolute Advantage

The ability of a country to produce a good more cheaply in absolute terms than another country.

Trade Liberalisation

The reduction of trade barriers, such as tariffs and quotas, to encourage free trade between countries.

PPF

Production Possibility Frontier, a curve that illustrates the trade-offs between two goods that a country can produce.

Terms of Trade

The rate of exchange of one product for another when two countries trade, indicating the quantity of exports needed to purchase a given level of imports.

Trading Blocs

Groups of countries within a geographical region that reduce or eliminate tariffs and other trade barriers among themselves.

WTO

The World Trade Organisation, established to promote trade liberalisation and ensure compliance with trade agreements.

Infant Industry Argument

The rationale for protecting new industries until they can compete on an equal footing in the international market.

Dumping

The practice of selling surplus goods in foreign markets at very low prices, potentially harming domestic producers.

Economic Union

The final step of economic integration, involving a common market with coordinated social, fiscal, and monetary policies.

Balance of Payments

A record of all economic transactions between residents of a country and the rest of the world, including the current account and capital account.

Exchange Rate

The value of one currency in terms of another, which can be affected by market demand and supply, interest rates, and economic conditions.

Marshall-Lerner Condition

A principle stating that a currency devaluation will improve a country's trade balance if the sum of the price elasticities of demand for exports and imports is greater than one.

J-Curve

A concept illustrating how a country's trade balance may initially worsen following a currency devaluation before improving over time.

Economic Stability

The condition of an economy characterized by steady growth, low inflation, and low unemployment, which is crucial for attracting investment and maintaining competitiveness.

Relative Unit Labour Costs

A measure of the cost of labor in relation to productivity, used to assess a country's international competitiveness.