The global economy (IB)

International Trade

The exchange of goods, services, and capital across national borders.

Increased Consumer Choice

International trade allows consumers access to a wider variety of goods and services.

Lower Prices

Competition from international markets can drive down prices for consumers.

Economies of Scale

Reduction in per-unit costs by increasing production volume in international trade.

Increased Efficiency and Productivity

Specialization leads to higher global productivity and output by countries.

Access to Resources

International trade enables countries to import resources that are scarce domestically.

Economic Growth

International trade can boost a country's GDP and create jobs.

Greater Innovation

Exposure to international markets encourages technological advancement.

Transfer of Technology and Knowledge

International trade helps in the sharing of advanced technology among countries.

Improved International Relations

Economic interdependence through trade fosters stronger diplomatic ties.

Absolute Advantage

A country can produce a good using fewer resources than another country.

Comparative Advantage

A country can produce a good at a lower opportunity cost than another country.

Opportunity Cost

The value of the next best alternative when making a choice.

Trade Protection

Government policies that restrict or limit international trade.

Tariffs

Taxes imposed on imported goods or services.

Quotas

Quantitative restrictions on the volume of imports allowed.

Subsidies

Government payments to domestic producers to lower production costs.

Administrative Barriers

Non-tariff barriers to trade arising from regulations and procedures.

Protection of Infant Industries

Temporary protection for new industries until they can compete globally.

National Security

Protection of industries vital for national safety and self-sufficiency.

Health and Safety Regulations

Trade restrictions to protect consumers from unsafe imports.

Anti-Dumping

Imposing tariffs on foreign goods sold below production costs to protect domestic industries.

Trade Diversion

Shift in imports from lower-cost external producers to higher-cost producers within a trading bloc.

Balance of Payments (BOP)

A record of all economic transactions between residents of a country and the rest of the world.

Current Account

Records transactions involving goods, services, income, and current transfers.

Capital Account

Records transactions related to the transfer of fixed and non-financial assets ownership.

Financial Account

Tracks the flow of financial capital in and out of a country.

Fixed Exchange Rates

A regime where a currency's value is tied to another currency or a basket of currencies.

Floating Exchange Rates

A currency's value is determined by market forces without fixed intervention.

Managed Exchange Rates

A combination of floating and fixed rates where the central bank intervenes as needed.

Marshall-Lerner Condition

Condition for currency depreciation to improve a country's trade balance.

J-Curve Effect

The initial worsening of a current account deficit followed by an eventual improvement after devaluation.

Sustainable Development Goals (SDGs)

A universal call to action to end poverty, protect the planet, and ensure prosperity for all.

Economic Development Indicators

Metrics that reflect a country's living standards, education, and health advancements.

Gini Coefficient

A measure of income inequality within a country.

Human Development Index (HDI)

A composite index measuring average achievement in health, education, and standard of living.