econ good ones ia1

Absolute advantage

the ability of a nation to produce commodities more efficiently than another nation

Balance of payments

the summary of a nation’s payments to, and the receipts from, the rest of the world

Balance of trade

the value of goods and services that Australian residents export less those that they import

Capital (economic resource)

Man-made goods used to produce other goods and services

Capital (financial resource)

Money or assets available for investment or business use

Capital (balance of payments)

Financial flows for investment and borrowing recorded in the capital and financial account

Capital and financial account

the record of movement of capital funds between a nation and the rest of the world

Commodity prices

the price of raw materials or primary products that can be bought, sold, or traded on markets.

Comparative advantage

the ability of a nation to produce a product at a lower opportunity cost of production than another nation

Competitive advantage (of a nation)

trade advantage obtained through the capacity of a nation’s industries to innovate and upgrade

Currency appreciation

an increase in the value of a currency relative to other currencies under a floating exchange regime

Currency depreciation

a decrease in the value of a currency relative to other currencies under a floating exchange regime

Currency devaluation

a deliberate downward adjustment to the value of a country’s currency relative to another currency, group of currencies or standard under a fixed exchange rate

Currency revaluation

a deliberate upward adjustment to the value of a country’s currency relative to another currency

Current account

the record of day-to-day financial transactions involving the trade of goods and services between a nation and the rest of the world

Current account surplus

the amount by which credits in the current account are greater than debits

Current account deficit

the amount by which debits in the current account are greater than credits

Economic integration

an arrangement among nations to reduce or eliminate trade barriers and coordinate monetary and fiscal policies

Economic union

an agreement between two or more nations to allow goods, services, money and workers to move over borders freely

Exchange rate

the value of the currency of a nation expressed in terms of the currency of another nation

Exchange rate (fixed)

the value of a currency that is determined by the government fixing it to the value of another currency at a certain level, and guaranteeing to maintain that level

Exchange rate (floating)

the value of a currency determined by the forces of supply and demand in the foreign exchange market

Exchange rate (managed)

a floating exchange rate system where the central bank intervenes in the foreign exchange market by buying or selling a nation’s currency

Exports

goods and services that one country sells to foreign nations

External sector

the sector of the circular flow of income model that includes exports to and imports from foreign countries

External stability

the situation in which there are no unwanted movements of foreign reserves in the balance of payments

Factor endowment

the supply of the factors of production (land, labour, capital and enterprise) that exists in a country

Foreign debt

A debt owed by a nation and its residents to the rest of the world

Foreign investment

Funds invested in an economy by the rest of the world

Free trade

trade of exports and imports in which government exerts little influence on the decisions of private firms and individuals; competitive market forces determine trade patterns

Imports

goods and services that one country buys from foreign nations

International trade

the purchase and sale of goods and services by firms and individuals in different countries

Internal stability

a state of the economy in which there is full employment and acceptable levels of inflation

Open economy

any nation that trades (exports and imports) and invests with other nations

Quota

an enforced limit on the quantity of a particular good which can be imported

Sustainable economic growth

a rate of growth that, if maintained correctly, should not create any significant economic problems for future generations; it sustains a nation’s natural resources and the environment

Tariff

a tax imposed on imported commodities

Terms of trade

a statistical concept that highlights the relationship between export prices and import prices

Trade liberalisation

is a policy designed to promote free trade and reduce protection levels between nations

Trade protection

policies such as tariffs and quotas implemented by government to provide domestic producers with an artificial advantage over foreign competitors

Trade weighted index (TWI)

A single number representing the value of the AUD compared to the currencies of Australia’s major trading partners, weighted by their contribution to our trade.