HSC Economics Topic 1 – The Global Economy (Vocabulary Flashcards)

A comprehensive set of vocabulary flashcards covering key terms and concepts from HSC Economics Topic 1 – The Global Economy.

Global Economy

The network of integrated national economies where changes in one economy create ripple effects in others.

Gross World Product (GWP)

The total market value of all final goods and services produced worldwide over a period of time.

Globalisation

The growing integration of countries and economies through trade, finance, investment, labour and technology flows.

Transnational Corporation (TNC)

A firm with production facilities in at least two countries and ownership spread across multiple nations.

Foreign Direct Investment (FDI)

Long-term cross-border capital movement to establish or acquire at least 10 % of a foreign business.

Foreign Portfolio Investment (FPI)

Short-term speculative movement of funds across borders aimed at earning quick financial returns.

Exchange Rate

The price of one country’s currency expressed in terms of another currency.

Speculator

Investor who buys or sells financial assets to profit from short-term price movements; dominates FOREX turnover.

International Trade (Volume)

The total quantity of goods and services exchanged between countries; now about 33 times larger than in 1950.

International Trade (Direction)

The geographical pattern of trade flows, increasingly oriented toward emerging East Asian and Pacific economies.

International Trade (Composition)

The product mix of world trade, recently featuring more fuels, minerals and fast-growing services like finance.

Financial Deregulation

The removal of controls on financial markets, exchange rates and capital flows to encourage competition and liquidity.

Global Financial Crisis (GFC)

The 2007–09 worldwide credit crunch triggered by US sub-prime mortgage defaults and banking losses.

International Business Cycle

Worldwide fluctuations in economic activity caused by interconnected trade, investment and financial links.

Regional Business Cycle

Economic fluctuations shared by countries within a particular geographic region, e.g. East Asia.

Comparative Advantage

The ability of a nation to produce a good at the lowest opportunity cost, forming the basis for free trade.

Free Trade

Trade without artificial barriers such as tariffs, quotas or subsidies, allowing markets to allocate resources.

Factor Endowment

The quantity and quality of a country’s resources—land, labour, capital and entrepreneurship.

Economies of Scale

Cost advantages gained by producing larger quantities, lowering average costs.

World Trade Organization (WTO)

Global body that administers trade agreements, settles disputes and promotes trade liberalisation.

Uruguay Round

1986-94 GATT negotiations that created the WTO and extended rules to services and intellectual property.

Doha Round

WTO negotiations begun in 2001 aimed at reducing agricultural protection and helping least-developed countries.

International Monetary Fund (IMF)

Institution that promotes exchange-rate stability and provides short-term financial assistance to members.

Structural Adjustment Policies

IMF-mandated reforms (e.g. fiscal tightening, deregulation) required for countries receiving IMF loans.

World Bank

International agency providing long-term loans and aid for development and poverty reduction projects.

International Development Association (IDA)

Arm of the World Bank that offers concessional loans to the world’s poorest nations.

United Nations (UN)

Organisation addressing global issues such as development, peace, human rights and environmental protection.

Millennium Development Goals (MDGs)

UN targets (2000-2015) to halve global poverty and improve health, education and gender equality.

Organisation for Economic Co-operation and Development (OECD)

Group of mainly industrial economies promoting policies for sustainable growth and higher living standards.

G8

Forum of eight major industrialised nations that met annually to discuss economic and geopolitical issues.

G20

Group of 19 countries plus the EU coordinating global economic policy; key role in responding to the GFC.

Trading Bloc

A group of countries with preferential trade arrangements that may discriminate against non-members.

Common Market

Customs union that also allows free movement of labour and capital among members.

Monetary Union

Most integrated bloc, unifying monetary, fiscal and social policies among member states.

European Union (EU)

Largest trading bloc integrating European economies with a single market and common currency (euro).

North American Free Trade Agreement (NAFTA)

1994 free trade area between the USA, Canada and Mexico eliminating most tariffs.

Asia-Pacific Economic Cooperation (APEC)

Forum of Pacific Rim economies aiming for open trade and investment without discriminatory barriers.

Association of Southeast Asian Nations (ASEAN)

Regional grouping promoting peace, free trade and development among ten Southeast Asian countries.

Infant Industry Argument

Rationale for temporary protection to help new industries achieve economies of scale and competitiveness.

Dumping

Selling exports in a foreign market below normal value, often to clear surpluses or gain market share.

Tariff

Tax on imports used to raise their price and protect domestic producers.

Quota

Direct limit on the volume or value of a good that may be imported.

Subsidy

Government payment to domestic producers to lower production costs and improve competitiveness.

Local Content Rule

Regulation requiring a minimum percentage of domestic inputs in a product.

Export Incentive

Grant, loan or tax concession designed to help domestic firms enter or expand in overseas markets.

Human Development Index (HDI)

UN composite index measuring life expectancy, education and per-capita income to gauge development.

Gross National Income (GNI)

Total income earned by residents of a country, including overseas income, often expressed per capita.

Purchasing Power Parity (PPP)

Exchange-rate concept adjusting for price level differences so identical goods cost the same across countries.

Advanced Economy

High-income, industrialised country with developed service and manufacturing sectors and high living standards.

Emerging Economy

Nation undergoing rapid industrialisation and sustained high growth, e.g. China, India, Brazil.

Developing Economy

Low- to middle-income nation with limited industrialisation, low living standards and reliance on agriculture.

Capital Widening

Investment needed to equip a growing workforce so capital per worker remains unchanged.

Microfinance

Provision of very small loans to the poor to start businesses and spur grassroots development.

Economic Dualism

Co-existence of a modern, capital-intensive sector and a traditional, subsistence sector within one economy.

Environmental Sustainability

Using resources in ways that meet current needs without compromising future generations’ ability to meet theirs.

Kyoto Protocol

International treaty committing signatories to reduce greenhouse-gas emissions relative to 1990 levels.

Capital Deepening

Increase in capital per worker, leading to higher productivity and potential economic growth.

Offshoring

Relocation of business processes to another country to exploit cost or efficiency advantages.

Brain Drain

Emigration of highly skilled workers from smaller or developing economies to richer nations.

Structural Adjustment

Policy changes (e.g. privatisation, deregulation) aimed at making an economy more market-oriented.

Speculative Capital Flow

Short-term international movement of funds seeking quick profits rather than productive investment.

Herd Mentality

Tendency of investors to follow prevailing market trends, amplifying price movements.

Protectionism

Any measure that gives domestic producers an artificial advantage over foreign competitors.

GINI Coefficient

Statistical measure (0–1) of income inequality within a country; higher values indicate greater inequality.

Five-Year Plan (China)

Chinese government blueprint setting economic and social priorities for a five-year period.

Going-Out Strategy

Chinese policy encouraging domestic firms to invest abroad to secure markets and resources.

Capital Flight

Large-scale movement of financial assets out of a country due to economic or political instability.

Terms of Trade

Ratio of export prices to import prices; measures a country’s purchasing power on world markets.

Balance of Payments (BOP)

Record of all economic transactions between residents of a country and the rest of the world over a period.

Foreign Exchange Market (FOREX)

Global decentralised marketplace where currencies are traded and exchange rates are determined.

Opportunity Cost

The value of the next best alternative forgone when a choice is made.

Absolute Advantage

Ability of a country to produce a good using fewer resources than another country.

Trade Creation

Increased economic welfare from a trade agreement as cheaper imports replace higher-cost domestic production.

Trade Diversion

Shift of trade to less efficient suppliers inside a bloc due to preferential tariffs, reducing global welfare.