Economics module 6 : International trade and globalization

Definitions only

Globalisation

the process by which the world is becoming increasingly interconnected through trade and other links

Quota

a limit placed on imports and exports

Embargo

a ban placed on imports and exports

Exchange control

a limit on the amount of foreign currency that can be obtained

Infant industries

new industries with relatively low output and high cost

Declining industries

old industries which are going out of business

Strategic industries

- industries that are considered important for the survival or development of the country

Foreign exchange rate

- the price of one currency in terms of another currency or currencies

Fixed exchange rate

one that is fixed and controlled by the central bank, acting on behalf of the government of the country.

Devaluation

A deliberate fall in the value of a fixed exchange rate

revaluation

A deliberate rise in the value of a fixed exchange rate

Floating exchange rate

an exchange rate that is determined freely by market demand and supply conditions, and so will fluctuate regularly

Appreciation

- a rise in the value of a floating exchange rate

Depreciation

a fall in the value of a floating exchange rate

Trade in goods

- the value of exported goods and imported goods

Trade in goods deficit

expenditure on imported goods exceeding revenue from exported goods

Trade in goods surplus

revenue from exported goods exceeding expenditure on imported goods

Trade in services

- the value of exported services and imported services

Trade in services deficit

expenditure on imported services exceeding revenue from exported services

Trade in services surplus

revenue from exported services exceeding expenditure on imported services

Primary income

- income earned by people working in different countries and investment income which comes into and goes out of the country

• income debits (outflows) include wages paid to overseas residents working in the UK, interests, profits and dividends paid out to overseas residents and firms who have invested in the UK

• income credits (inflows) include wages paid to UK residents working overseas, interests, profits and dividends earned by UK residents and firms on investments they have in other countries

Secondary income

- transfers between residents and non-residents of money, goods or services, not in return for anything else

• debits (outflows) will include financial aid, donations, pension payments etc. paid to overseas residents and foreign governments, and tax and excise duties paid by UK residents on foreign purchases

• credits (inflows) will include financial aid, donations, grants, pension payments etc. received from overseas residents and foreign governments, and tax and excise duties paid by overseas residents on UK purchases

Current account balance

- a record of the income received and the expenditure made by a country in its dealings with other countries