IB HL Economics – Paper 2 defintions: International Trade and Development Economics
Unlock all answers in this set
Unlock answersquestion
Resource allocation
answer
is concerned with how resources (land, labor, capital and entrepeneurship) are distributed in an economy.
question
Free trade
answer
free trade exists where there is trade (exporting and importing) between different countries, without government intervention/regulation.
question
World Trade Organisation
answer
an international body that encourages the reduction of trade barriers between its member nations
question
Protectionism
answer
government intervention in order to restrict trade between countries
question
Quota
answer
import barriers that set limits on the quantity (or value) of imports that may be imported into a country
question
Types of protectionist measures
answer
-tariff -quota -subsidy -administrative barrier -environmental -health or safety regulations -government procurement policies -voluntary export restraints
question
Administrative barries
answer
Include: Bureaucratic barriers (customs check for health & safety and packaging requirements) Product standards (for health, safety, environmental and quality) Qualifications (to legally give work - profession)
question
Dumping
answer
the selling of a good in another country at a price below its cost of production.
question
Anti-dumping
answer
is government legislation [= the imposition of tariff] against the selling of imported goods at a price below their production costs
question
Inward-oriented policies
answer
policies designed to encourage the domestic production of goods, rather than importing them (strategy encouraging protectionism)
question
Import substitution
answer
a strategy/policy/measure to deliberately reduce imports (for example through protectionism to encourage/create a domestic industry)
question
Trade cycle
answer
a cycle/pattern in economic activity over a period of time. (A diagram showing slump, recovery, boom and recession would be sufficient for full marks - so it's basically the business cycle!!!)
question
Exchange rate
answer
the value (price) of one currency expressed in terms of another
question
Floating exchange rate
answer
is where the exchange rate (i.e. price of one currency in terms of another) changes according to the market forces of demand and supply.
question
Fixed exchange rate
answer
an exchange rate that is held to a narrow band of possible prices through government intervention
question
Managed exchange rates (managed float)
answer
a system where the exchange rate is determined by market forces, but the government/Central Bank intervenes from time to time in order to keep it within a certain \"band\" (= range).
question
(Official) foreign (currency) reserves
answer
reserves of foreign currencies (non domestic currency that is saved/deposited for future use) held by the central bank or the government of a country
question
Currency appreciation
answer
when the value of the currency is increasing, expressed in terms of another currency (in a floating exchange rate system)
question
Currency depreciation
answer
when the value of the currency is decreasing, expressed in terms of another currency (in a floating exchange rate system)
question
Current account
answer
a measure of a country's trade in goods and services with the rest of the world
question
Components of the current account of the balance of payments (know all 4)
answer
-balance of trade in goods -balance of trade in services -(investment or factor) income (interest, dividends, profit) -(current or net) transfers
question
Current account balance
answer
the difference between the revenues earned from exports of goods and services and the expenditure on the imports of goods and services
question
Current account surplus
answer
is where revenues from the exports of goods and services plus net income flows are greater than the spending on the imports of goods and services.
question
Current account deficit
answer
is where the value of total imports of goods and services plus net income flows are greater than the value of total exports of goods and services
question
Trading bloc
answer
an agreement between governments of two or more nations where regional barriers to trade (tariffs, quotas and bureaucratic barriers) are reduced or eliminated between the participating states
question
Preferential trade agreement
answer
a type of economic integration that removes (or reduces) trade barriers for certain products to countries that are in the agreement
question
Free trade area
answer
is an agreement whereby there is free trade among member countries, but each member can maintain its own trade barriers in trade with non-member countries
question
Customs union
answer
the attempt of having tariff-free trade between two or more countries, which also settle on common tariff rates on imports from non-member nations
question
Common market
answer
is like a customs union, but in addition, the 4 factors of production are able to flow freely between member nations
question
Economic/monetary union
answer
a common market with a common currency (which is regulated by a common central bank)
question
Economic development
answer
is a broader concept than economic growth involving welfare improvements to the standard of living including health, education and shelter, or any other appropriate indicators
question
Economic Growth
answer
is the growth of real output in an economy over time and it is measured by an increase in real GDP.
question
Developing countries (what they are characterised by)
answer
Countries which generally have: • low per capita income • high rates of poverty • low standard of living • low HDI ranking/value
question
The World Bank
answer
an organisation whose main aims are to provide aid and advice to developing countries
question
Multinational Corporations (MNCs)
answer
companies that have productive units in more than one country.
question
Poverty cycle/trap
answer
a cycle that involves low incomes which lead to low savings and low investment which ensure low incomes in the future (as this means low capital and low productivity)
question
Infrastructure
answer
involves essential facilities and services such as roads, airports, sewage treatment, railways, telecommunications and other utilities typically provided by the government.
question
Foreign direct investment
answer
a long-term investment (the establishment of production units) by multinational companies in a foreign country.
question
Investment
answer
is expenditure by firms on capital equipment and is an injection into the economy.
question
Official aid (or official development assistance)
answer
aid that is provided to a country by another government (it may be multilateral or bilateral)
question
Development aid
answer
the name for long-term and short-term loans, grants, technical assistance, etc. given to a country for the purpose of increasing the living standards of that country
question
Types of development aid (know at least 3)
answer
-grants -concessional long-term loans -project aid -programme aid -debt cancellation -technical assistance -humanitarian aid -multilateral aid -bilateral aid
question
Bilateral aid
answer
aid that is given directly from one country to another
question
Multilateral aid
answer
money that is given by countries to international (or multilateral) institutions which are distributed to countries
question
Transfer payments (2 different definitions)
answer
a payment received (from the government) for which no good or service is exchanged (for the purpose of redistributing income) OR a form of aid where money is transferred from one country to another
question
Corruption
answer
the abuse of public office for private gain
question
Sustainable development
answer
the development needed to meet the needs of the present generation without compromising the ability of future generations to meet their own needs.
question
Indebtedness
answer
the amount of money that a country owes to other countries and/or international institutions.
question
Micro-credit
answer
a loan which allows poor people to set up a small scale business (and contributes to the empowerment of women)
question
Official aid
answer
is provided to a country by another government or governmental organisation such as UN or EU.
question
Tied aid
answer
is granted on the condition that it is used to buy goods or services from the donor country.
question
Gini Coefficient
answer
a measure of inequality in the distribution of income.
question
Informal markets
answer
refer to markets in which economic activity is not officially measured/ recorded.
question
NGOs
answer
non-government organisations that exist to: promote sustainable economic development and/or humanitarian ideals.
question
Absolute poverty
answer
the condition experienced by people in a country whose incomes are too low (below a certain level/the poverty line) to be able to afford even the most basic necessities for a healthy and safe existence (earning less than 1.25$ per day - moderate poverty is below 2%)
question
Relative poverty
answer
the condition experience by people in a country whose incomes are considerably lower than the higher income group in the same country
question
Capital widening
answer
extension of capital goods to a larger segment of workers
question
Capital deepening
answer
the increase of capital per worker (each worker has more capital)
