Term
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Definition
| The growing integration and interdependence of the world economy i.e. the increased international movement of output, financial capital, foreign direct investment and the harmonisation of consumer tastes. |
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Term
| Comparative Advantage (C/A) |
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Definition
| The producer with the lowest opportunity cost of production for a particular product. |
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Term
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Definition
| The producer with the ability to make the largest amount of a particular product using its factors of production. |
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Term
| Multinational Companies (MNC) |
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Definition
| Large company with production based in several different countries. |
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Term
| Foreign Direct Investment (FDI) |
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Definition
| Spending by firms on productive capacity in other countries. |
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Term
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Definition
| The raising of trade barriers against imports. |
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Term
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Definition
| Rationale for protecting domestic firms from foreign competition until they have grown large enough to achieve the economies of scale to match rival foreign firms. |
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Term
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Definition
| A tax on products imported into a customs union. |
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Term
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Definition
| A limit on the number of imported goods allowed into a country over a period of time. |
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Term
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Definition
| Methods to prevent the sale of imports apart from tariffs and quotas. |
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Term
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Definition
| Practice of selling exports in foreign markets at below cost. |
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Term
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Definition
| Organisation to promote free trade and coordinate (and police) reduction to barriers to trade. |
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Term
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Definition
| A group of countries which coordinate a reduction of trade barriers between themselves but do not erect a common external tariff. |
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Term
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Definition
| A group of countries with reduced trade barriers (tariffs and quotas) between members but a common external tariff against imports from outside. |
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Term
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Definition
| The stage of economic integration between states when barriers to capital (e.g. exchange controls) and labour mobility (e.g. visas) are removed. |
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Term
| Economic and Monetary Union (EMU) |
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Definition
| When a group of countries in a common market abolish national currencies to share a single currency (and therefore operate a single monetary policy for the whole union). |
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Term
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Definition
| Macro economic conditions which must be met in order before a country is allowed to join an Economic and Monetary Union. |
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Term
| Stability and Growth Pact |
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Definition
| Limit placed on government budget deficit for countries belonging to the European Single Currency. |
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Term
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Definition
| A group of countries who form a free trade area, customs union or common market as a way to reduce trade barriers between them and raise barriers to non-members. |
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Term
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Definition
| The welfare losses to a country from joining a customs union. |
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Term
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Definition
| The ability of domestic firms to sell their output in the global market (domestic + foreign). |
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Term
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Definition
| The rules which determine how a country's exchange rate is set. |
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Term
| Floating Exchange Rate System |
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Definition
| Exchange rate is freely determined by market forces (without government intervention targeting E.R.) |
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Term
| Fixed Exchange Rate System |
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Definition
| Exchange rate is maintained at a target level by government interventions in the currency market. |
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Term
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Definition
| Fall in the value of the exchange rate, usually announced by the government when part of a fixed exchange rate system. |
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Term
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Definition
| Fall in the value of the exchange rate when part of the floating exchange rate system. |
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Term
| Marshall Lerner Condition |
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Definition
| The sum of elasticity of demand of exports and imports must exceed one. |
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Term
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Definition
| The short term fall in the Balance of Payments current account following a devaluation of the exchange rate before long run elastic demand for imports and exports leads to rise. |
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Term
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Definition
| Money in search of the highest short term rate of return internationally. |
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