The Global Economy Flashcards

Flashcards on the Global Economy

Global Economy

The economies of individual countries linking to each other, where changes in one economy can affect others.

Gross World Product (GWP)

Total value of goods and services produced globally over a period.

Purchasing Power Parity (PPP)

A concept that uses a 'basket of goods approach' to compare the values of different currencies.

Globalization

Increasing integration between economies through trade, capital flows, and technological change.

Foreign Direct Investment (FDI)

Movement of funds for establishing new companies or buying substantial shares in existing ones (≥10% controlling interest).

Transnational Corporations (TNCs)

Large companies that dominate global markets.

International Division of Labour

Specialization of labor, where production tasks are allocated to different people in different countries.

International Business Cycle

Fluctuations in Gross World Product (GWP) over time.

Regional Business Cycle

Fluctuations in GDP within a specific geographical region of the global economy over time.

Free Trade

Situation where governments do not impose artificial barriers to shield domestic producers from foreign competition.

Protectionism

Government actions that give domestic producers an artificial advantage over foreign competitors, restricting free trade.

Absolute Advantage

Ability of an economy to produce more of a good/service with same inputs.

Comparative Advantage

Nations should specialize in what they produce at the lowest opportunity cost to maximize living standards.

World Trade Organization (WTO)

An organization focused on world trade agreements and trade liberalization.

International Monetary Fund (IMF)

Its goal is to maintain international financial stability and coordinate monetary policy.

World Bank (WB)

Reduce extreme poverty, inequality and promote economic development via loans and grants.

United Nations (UN)

Maintain international security and improve the global economy.

OECD

Shape policies that foster prosperity and equality

G7/G8

Forum for coordinating global macroeconomic policy; includes major industrialized nations.

G20

Includes 19 of the world’s largest economies plus the EU, covering 80% of GWP.

Trading Blocs

When a number of countries join together in a formal preferential trading agreement, to the exclusion of other countries

Monetary Unions

A zone where a single monetary policy prevails and inside which a single currency circulate freely

Free Trade Agreements

Formal agreements between countries designed to break down barriers to trade.

EU (European Union)

Trading bloc with 28 members focused on free flow of agriculture, labour and other goods and services.

APEC (Asia-Pacific Economic Cooperation)

21 member economies supporting the WTO and addressing trade barriers.

NAFTA (North American Free Trade Agreement)

Trading bloc between US, Canada, and Mexico.

ASEAN

Association of Southeast Asian Nations

CERTA (Closer Economic Relations Trade Agreement)

Trade agreement between Australia and New Zealand to reduce trade barriers.

TPP (Trans-Pacific Partnership)

Aims to reduce over 18,000 tariffs to attempt to promote greater economic growth.

Protection

Government action giving domestic producers an artificial advantage over foreign competitors.

Infant Industry Argument

Shield new industries from foreign competition to allow them to build capacity.

Domestic Employment (Protectionism)

Protect domestic industries by restricting imports.

Dumping

Selling goods in a foreign market cheaper than in the domestic market.

Quotas

Restrictions on the amount or value of goods imported.

Subsidies

Cash payments from the government to encourage production.

Local Content Rules

Goods must contain a minimum percentage of locally made parts.

Export Incentives

Programs providing assistance to domestic producers, such as grants and loans.

Economic Growth

Increase in real GDP over time.

Economic Development

Broad measure of welfare including health, education, and environmental quality.

Human Development Index (HDI)

Measure that includes Gross National Income per capita, life expectancy, and education levels.

Wealth

Total value of assets owned by an individual.

Advanced Economies

Countries with high income levels, economic ties, and liberal institutions.

Developing Economies

Countries with low income levels and limited industrialization.

Emerging Economies

Countries industrializing and experiencing high economic growth.

Digital Divide

Poorer nations lacking consistent internet access; restricts ability to trade online.

FTAs

Trade agreements exclude poorer nations due to the cost in implementing agreements and lodging appeals

Environmental Sustainability

Ability to maintain an ecological balance and conserve natural resources.