Hsc Economics Notes the Global Economy

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The global economy
Key glossary of terms

Capitalism: an economic system where an individual rights, including private ownership , and the free operation of markets as the main determinant of production and distribution issues Economic growth: sustained increase in the production of goods and services over time and is measured by percentage changes real gross domestic product (GDP) Global Economy: Refers to the level of activity generated worldwide, as measured by the summation of domestic GDPs converted to a common unit of measurement, such as US dollars based on relative purchasing-power parity Gross Domestic Product: (GDP) measure of total value of goods and services produced in an economy over a period of time Purchasing Power Parity: taking a basket of common goods found in most countries and comparing their relative prices, bearing in mind they should cost the same in each country. This allows an alternative exchange rate calculation, to market-determined rate, and a more accurate world GDP determination Advanced Economies: (developed/industrialised economies) have high per casita income and well-developed manufacturing and tertiary industries Capital Flight: sudden movements of large amounts of debt funds out of an economy, which can lead to disruptions to domestic economic activity, exchange rate depreciations and financial contagion Developing economies: have low levels of per capita income and limited industrialisation External Shock : refers to a change in the world economy that can impact on the level of economic activity of a domestic economy Financial Contagion: where a financial crisis occurring in one economy can spread to other economies in the region or even worldwide because of the integrated nature of financial markets Foreign Direct Investment (FDI) is the purchase of real assets, such as factory, or the purchase of more than 10 per cent of shares in an existing company International Business Cycle: is the changing world economic activity over time, as measured by gross world product Spillover Effect: when a market transaction can have an impact beyond that transaction on some other part of the economy. (dubbed as externalities) spill over effects may be positive or negative Transnational Corporations: are business organisations that see the world as their marketplace but also have production facilities in many places throughout the world Absolute Advantage: when an economy can produce more of a good than another economy, using the same quantity of resources Comparative advantage: when an economy has lower opportunity cost of producing a good from another economy, international trade is beneficial for economies based on their comparative advantage Sunset industries: those industries that do not have a comparative advantage and have only survived through extensive protection measures Infant industries: industries despite having a comparative advantage may initially require some assistance or protection when competing with established overseas firms Dumping: selling of (particularly agricultural) goods in an overseas market that is below its cost of production to eliminate surpluses or to gain a market share. Dumping is illegal as it may impact adversely on domestic industries Bilateral trade agreement: involves establishing a trade agreement with another economy that is usually in the same region Multinational trade policy: the pursuit of trade policy by membership of an international organisation such as the World Trade Organisation to achieve global agreement on trade issues Trade diversion: occurs when economic integration through the formation of trading blocs excludes trade with non-member countries who may be more efficient producers Trading bloc: a group of countries (same region) that establish a free trade zone between them , while maintaining protection levels with the rest of the world Trade rounds: multilateral trade talks conducted initially by GATT and then the WTO Globalizer: an...
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