4.1 International economics - Key terms

Globalisation

The process by which national economies become more integrated and interdependent through greater flows of goods/services, capital, labour, technology and information.

TNC/MNC

A firm that operates across multiple countries, often coordinating production, investment and sales internationally.

FDI

Investment by a firm or individual in productive assets in another country, usually involving significant ownership/control.

Trade liberalisation

Reducing protectionist barriers such as tariffs and quotas to increase international trade

Capital mobility

The ability of financial capital to move between countries in response to investment opportunities.

Labour mobility

The ability of workers to move between countries to find employment

Outsourcing

Contracting production or services to an external firm, often in another country.

Offshoring

Relocating business activities to another country, often to reduce costs or access resources

Economies of scale

Falling average costs as the scale of production increases

Global supply chain

A production process in which different stages occur across multiple countries.

Comparative advantage

When a country benefits from producing a good/service at a lower opportunity cost than its trading partner

Absolute advantage

When a country can produce a goods/service at a higher output than another country using the same amount of resources

Trade bloc

A group of countries that agree to reduce or remove barriers to trade between members.

Bilateral trade agreement

When two countries agree to remove barriers to trade

Multilateral trade agreement

When multiple countries agree to reduce barriers to trade

Tarrif

A tax placed on imports

Quota

A limitation on the quantity of goods that can be imported

Interdependence

The situation where countries become increasingly dependent on one another because economic events in one country affect others.