Economics Topic 1 Year 12

Question 1

Globalisation

Answer 1

Refers to the integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity

Question 2

Gross World Product (GWP)

Answer 2

The sum of total output of goods and services by all economies in the world over a period of times

Question 3

World Trade Organisation (WTO)

Answer 3

An organisation of 164 member countries that implements and advances global trade agreements and resolves trade disputes between nations

Question 4

Composition of trade

Answer 4

The mix of what goods and services are traded

Question 5

Speculators

Answer 5

Investors who buy or sell financial assets with the aim of making profits from short-term price movements

Question 6

Exchange Rates

Answer 6

The price of one currency in terms of another economy’s currency

Question 7

Foreign Exchange Market

Answer 7

The market in which currencies are traded

Question 8

International Monetary Fund (IMF)

Answer 8

An international agency that consists of 190 members and oversees the stability of the global financial system

Question 9

Foreign Direct investment (FDI)

Answer 9

The movement of funds between economies for the purpose of establishing a new company or buying a substantial proportion of shares in an existing company

Question 10

Transnational Corporations (TNCs)

Answer 10

Global companies that dominate global product and factor markets, they have production facilities in at least two countries and are owned by residents of at least two countries

Question 11

International Division of Labour

Answer 11

How the tasks in the production process are allocated to different people in different countries around the world

Question 12

Business Cycle

Answer 12

The fluctuations in the level of economic growth due to either domestic or international factors

Question 13

Gross Domestic Product

Answer 13

The total market value of all final goods and services produced in an economy

Question 14

International Business Cycle

Answer 14

The fluctuations in the level of economic activity in the global economy over time

Question 15

Factors that Strengthen The International Business Cycle

Answer 15

• Trade flows
• Investment flows
• Transnational corporations
• Financial flows
• Technology
• Global interest rates
• Commodity prices
• International organisations

Question 16

Factors That Weaken The International Business Cycle

Answer 16

• Domestic interest rates
• Government fiscal policies
• Other domestic economic policies
• Exchange rates
• Structural factors
• Regional factors

Question 17

Regional Business Cycle

Answer 17

The fluctuations in the level of economic activity in a geographical region of the global economy over time

Question 18

Comparative Advantage

Answer 18

The economic principle that nations should specialise in the areas of production in which they have the lowest opportunity cost

Question 19

Opportunity Cost

Answer 19

The cost of satisfying one want over an alternative want, also know as the economic cost

Question 20

Free Trade

Answer 20

A situation where there are no artificial barriers to trade imposed by governments for the purpose of shielding domestic producers from foreign competitors

Question 21

Protection

Answer 21

Refers to government policies that give domestic producers an artificial advantage over foreign competitors

Question 22

Dumping

Answer 22

The practice of exporting goods to a country at a price lower than their selling price

Question 23

Aggregate Supply

Answer 23

The total supply of goods and services produced within an economy at a given overall price level and in a given period

Question 24

Aggregate demand

Answer 24

The total demand for goods and services within an economy at a given overall price level and in a given period

Question 25

Financial market confidence

Answer 25

The level of confidence that investors and consumers have in financial markets. Affected by economic conditions, confidence can lead to increases or declines in investment and spending

Question 26

Animal spirits

Answer 26

A term used in economics to describe the emotions and instincts that drive consumer and business confidence, influencing economic decision-making

Question 27

Tariffs

Answer 27

Taxes on imported goods imposed for the purpose of protection

Question 28

Key Reasons for Protection

Answer 28

Protecting infant industries Prevention of dumping Protection of domestic employment National security and self-sufficiency

Question 29

Regional integration

Answer 29

The process through which neighbouring countries coordinate policies, reduce trade barriers, and increase economic cooperation to strengthen their regional economies

Question 30

Trade bloc

Answer 30

Occurs when a number of countries join together in a formal preferential trading agreement, to the exclusion of other countries

Question 31

Quotas

Answer 31

Refer to restrictions on the amounts or values of various kinds of goods that may be imported

Question 32

Subsidies

Answer 32

Cash payments from the government to businesses to encourage production of a good or service and influence the allocation of resources in an economy

Question 33

Local content rules

Answer 33

Goods must contain a minimum percentage of locally made parts, in return for not attracting a tariff

Question 34

Export incentives

Answer 34

Programs which give domestic producers assistance such as grants, loans or technical advice and encourage businesses to penetrate global markets or expend their market share

Question 35

Advantages of free trade

Answer 35

- Allows countries to obtain goods and service that they cannot produce themselves - Allows countries to specialise according to comparative advantage - Encourages the efficient allocation of resources - Leads to economies of scale - Improves international competitiveness of domestic producers - Encourages innovation and development - Leads to higher living standards

Question 36

Disadvantages of free trade

Answer 36

- Increase in unemployment in the short-term, can lead to longer term unemployment in some domestic industries that are less efficient - More difficult to establish new industries - May encourage environmentally irresponsible production methods - May incite "dumping" practices - May undermine national security in times of emergency, reduces self-sufficiency

Question 37

GWP Stat

Answer 37

GWP = US$105 trillion

Question 38

Composition of Trade Stat

Answer 38

- Manufactured goods make up 54% of global trade (6% ↓ from 1995) - Commercial services make up 24% of global trade (4% ↑ from 1995)

Question 39

Direction of Trade Stat

Answer 39

- High-income share of global trade ↓ from 85% to 70%

Question 40

Technology Stat

Answer 40

- Internet usage has ↑ from 7% in 2000 to 67% in 2023

Question 41

Migration Stat

Answer 41

Economies received remittances from overseas workers of US$790 billion in 2022

Question 42

Trade Diversion

Answer 42

Where a country's imports of a good or service switch from coming from the most efficient producer to another country because of the impacts of a trade agreement's provisions