Economics

Unit 3

Open Economy

Opens itself up to internatinal trade

Closed Economy

Does not engage with the forgeign sector

Economics intergration

Countries remove trade barriers and make it easier to trade with each other

Economic Union

An agreement between countries to reduce or remove trade barriers and allow freer trade

Factor Endownment

The supply of resources that a country has available

Exchange Rate

The value of ones countrys currency compared to another country

Stadard of Living

Measure of how well people live based on income and quailty of lfie

How does trade assist economic growth

Trade increases exports, production jobs, income and GDP, helping ecnomony grow

Sustainable economic growth

Economic growth that can be maintained over a long period of time

External Stability

No unwanted changes in foreign reserves or the Balance of Payments (BoP)

What is BoP?

A record of all payments and receipts between Australila and the rest of the world

Internal Stability

Having both price stability and full employment

Basis Point

when working with data that comes in a percentage change already

Absolute Advantage

The ability of a country to produce more of a good or service using the same amount of resources than another country

Who developed the idea of Absolute Advanatge

Adam Smith

What is a PPC

Shows the maximum amount of 2 goods a country can produce using its resources efficiently

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country

What is Opportunity Cost

The next best alternative that is given up when a choice is made

Competitive Advantage

A trade advanatge gained through innovation, technology, productivity, skills and upgrading industries

Competitive Advantage focuses on what?

Innovation and improvment

Factor Conditions

The quality and availability of a country’s factors of production such as labour, infrastructure, technology and resources

Demand Conditions

The nature and strength of domestic consumer demand that pushes businesses to innovate and improve

Related and Supporting industries

Strong suppliers and support industries that help businesses become more productive and competitive

Firm Structure, Strategy and Rivalry

The way businesses are organised, managed and compete within a country

Specialisation

Focusing on producing the goods and services a country is best at producing

Self-Sufficiency

Producing enough goods and services to meet a countrys own needs