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International & Development Economics Definitions
Terms in this set (60)
The exchange of goods or services between two countries.
Where a country is able to produce more output than other countries using the same input of factors of production.
the ability of a country to produce a good/service at a lower opportunity cost than another country.
World Trade Organization (WTO)
An international organization that provides the institutional and legal framework for the trading system that exists between member nations worldwide, responsible for liberalizing trade, operating a system of trade rules and providing a forum for trade negotiations between governments, and for settling trade disputes.
the imposition of trade restrictions to prevent the free entry of imports into a country and protect the domestic economy from foreign competition.
A duty (tax) that is placed upon imports.
An amount of money paid by the government to domestic firms as a form of protection against imports and foreign competition (due to the lower costs and lower prices that arise from the subsidy).
The selling of a good in another country at a price below its unit cost of production.
Import barriers that set limits on the quantity or value of imports that may be imported into a country.
Voluntary export restraints
A voluntary export restraint is self-imposed quota, put in place by the exporting country or industry.
The value of one currency expressed in terms of another currency.
Floating exchange rate
A floating exchange rate is one where the price of a currency is determined by the free market interaction of supply and demand for the currency.
Fixed exchange rate
An exchange rate system under which a country's currency is pegged against another currency.
Managed exchange rate
A managed float exchange rate system is one where the government periodically intervenes to keep the rate within a wide band of acceptable values.
an increase in the market value of a currency against another (or in a floating exchange rate system).
a decrease in the market value of a currency in terms of another.
Where foreign currency traders make a decision to buy or sell a currency based on their expectations of future exchange rate movements.
an increase in the value of a currency in a fixed exchange range system.
a decrease in the value of a currency in the context of a fixed exchange rate system.
An overvalued currency
one that has a value that is too high relative to its equilibrium free market value. Its exchange rate has been set at a higher level than the equilibrium market exchange rate.
An undervalued currency
one whose value is too low relative to its equilibrium free market value; its exchange rate is low relative to the one the market would have determined.
Purchasing power parity
the theory that, in the long run, identical products and services that are sold in different countries should cost the same
Balance of payments
A measure of economic transactions between a country and the rest of the world.
A measure of the international flow of funds from trade in goods and services, plus net investment income flows (profit, interest and dividends) and net transfers of money (foreign aid, grants and remittances).
Current account deficit
a situation in which the current account balance has a negative value, meaning that debits (imports, remittances, ets.) are larger than credits.
the component of BoP that records net changes in foreign ownership of domestic financial assets (FDI, portfolio investments, and reserve assets).
Reserve assets (or official reserves)
foreign currency reserves that the central bank can buy or sell to influence the value of the country's currency.
Foreign Direct investment
a long-term investment in another country (representing at least 10% ownership) by a multinational corporation.
Multinational corporation (MNC)
Companies based in one country that set up production units, e.g. factories, farms, mines or retail outlets, in other countries.
The purchase of financial investments such as shares and bonds in order to gain a financial return in the form of interest or dividends.
A condition that states that a depreciation or devaluation of a country's currency will lead to an improvement in that country's balance of trade if the sum of the price elasticities of demand for imports and exports must be greater than 1.
A curve that plots the balance of trade on the vertical axis and time on the horizontal axis, showing that a country with a devaluing/depreciating currency may see a worsening in its trade balance in the period immediately following the devaluation or depreciation, while in a later period the trade deficit will begin to shrink.
economic co-operation between countries and coordination of their economic policies, leading to increased economic links between them.
Any association of one or more countries where an agreement is made to reduce trade barriers.
Preferential trade agreement
is a type of economic integration that removes (or reduces) trade barriers for certain products to countries that are in the agreement.
Free trade area
An agreement made between countries, where the countries agree to work towards free trade among themselves, but are able to trade with countries outside the free trade area in whatever way they wish.
A type of trading bloc in which countries eliminate any remaining tariffs in trade between them, have a common external policy, and eliminate all restrictions on movements of any factors of production within them.
A customs union with common policies on product regulation, and free movement of goods, services, capital and labor.
A trading bloc in which member states eliminate all barriers to trade between them, allow for the free flow of the factors of production, adopt common tariffs on non-member states, and use a common currency managed by a shared central bank.
Terms of trade
the ratio of the indexed average price of a country's exports to its imports.
Occurs when the entry of B country into a customs union leads to the production of a good moving from a high-cost producer to a lowcost producer.
The replacement of lower cost products (from a more efficient exporter) by higher cost imports (from a less efficient exporting country) that results when a trading bloc is formed and trade barriers are removed.
the sustainable increase in living standards for a country, typically characterized by increases in life span, education levels, and income.
A self-perpetuating cycle that arises when low incomes result in low (or zero) savings, permitting only low (or zero) investments in physical, human and natural capital, and therefore low productivity, which in turn gives rise to low income growth.
Millennium Development Goals (know 4 of the 8)
Eradicate extreme poverty and hunger, Achieve universal primary education, Promote gender equality and empower women, Reduce child mortality, Improve maternal health, Combat HIV/AIDs, malaria and other diseases, Ensure environmental sustainability, Develop a global partnership for development
Human Development Index
A composite indicator of development which includes indicators that measure three dimensions of development: income per capita, levels of health and educational attainment
A strategy to reduce reliance on the export of a narrow range of exports by re-allocating resources to a wider range of industries.
Grants or loans that are given to a country, but only on the condition that the funds are used to buy goods and services from the donor country
Loans of small amounts that given to people who use the loans to start up small-scale businesses.
Technology that caters to the particular economic, social, and environmental characteristics of its users.
Strategies to encourage the domestic production of goods, in order to reduce imports and stimulate local producers. Such policies rely on the use of protectionism.
A growth and trade strategy where a country attempts to achieve economic growth by expanding its exports. As a trade strategy, it looks outward towards foreign markets and is based on stronger links between the domestic and global economies.
Official development assistance (ODA)
foreign aid that is offered by countries or by international organizations composed of a number of countries.
Foreign aid extended in regions where there are emergencies caused by violent conflicts or natural disasters such as floods, earthquakes and tsunamis, intended to save lives, ensure access to basic necessities.
A development assistance provided by bilateral or multilateral development organizations, which is extended to countries on condition that they satisfy certain requirements.
Non-governmental organization (NGO)
An organization not associated with a government that exist to promote economic development and/or humanitarian ideals and/or sustainable development.
The total debt owed by the government of one country to foreign lenders.
The act of eliminating the debt owed by a developing country government in order to allow it to achieve development objectives.
An organization whose main aims are to provide aid and advice to developing countries, as well as reducing poverty levels and encouraging and safeguarding international investment
International Monetary Fund (IMF)
An international financial institution whose purpose is to make short-term loans to governments on commercial terms (i.e. non-concessional) in order to stabilize exchange rates, alleviate balance of payments difficulties and help countries meet their foreign debt obligations.
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