Global

Question 1

What is Absolute Advantage?

Answer 1

The ability of a country to produce more of a good with the same amount of resources than another country.

Question 2

What is Comparative Advantage?

Answer 2

The ability of a country to produce a good at a lower opportunity cost than another country.

Question 3

What is Free Trade?

Answer 3

International trade without any government-imposed barriers such as tariffs or quotas.

Question 4

What is Specialization?

Answer 4

When countries focus on producing goods they are most efficient at and trade for others.

Question 5

What is a Tariff?

Answer 5

A tax imposed on imported goods to raise their price and reduce import volumes.

Question 6

What is a Quota?

Answer 6

A physical limit on the quantity of a good that can be imported into a country.

Question 7

What is a Trade Subsidy?

Answer 7

A payment from the government to domestic producers to make them more competitive against imports.

Question 8

What are Administrative Barriers?

Answer 8

Regulations or paperwork that make it difficult or expensive to import goods.

Question 9

What is the Infant Industry Argument?

Answer 9

The justification for protecting new industries until they become competitive.

Question 10

What is Dumping?

Answer 10

Selling goods abroad at a price lower than the cost of production

Question 11

What is an Exchange Rate?

Answer 11

The value of one currency expressed in terms of another.

Question 12

What is Currency Appreciation?

Answer 12

An increase in the value of a currency in a floating exchange rate system.

Question 13

What is Currency Depreciation?

Answer 13

A decrease in the value of a currency in a floating exchange rate system.

Question 14

What is Revaluation?

Answer 14

A government decision to increase the value of a currency in a fixed exchange rate system.

Question 15

What is Devaluation?

Answer 15

A government decision to lower the value of a currency in a fixed exchange rate system.

Question 16

What is a Floating Exchange Rate?

Answer 16

Exchange rate determined by market forces without government intervention.

Question 17

What is a Fixed Exchange Rate?

Answer 17

Exchange rate set and maintained by the government or central bank.

Question 18

What is a Managed Exchange Rate (Dirty Float)?

Answer 18

A system where the exchange rate is mostly determined by the market

Question 19

What are Foreign Exchange Reserves?

Answer 19

Foreign currencies held by the central bank to manage exchange rates and stabilize the currency.

Question 20

What is Currency Speculation?

Answer 20

Buying and selling currencies in expectation of future changes in exchange rates.

Question 21

What is the Balance of Payments (BoP)?

Answer 21

A record of all economic transactions between a country and the rest of the world.

Question 22

What is the Current Account?

Answer 22

Records trade in goods and services

Question 23

What is the Capital Account?

Answer 23

Records capital transfers and acquisition/disposal of non-produced

Question 24

What is the Financial Account?

Answer 24

Records investment flows such as direct investment

Question 25

What is a Current Account Surplus?

Answer 25

When a country exports more than it imports.

Question 26

What is a Current Account Deficit?

Answer 26

When a country imports more than it exports.

Question 27

What are Expenditure-switching policies?

Answer 27

Policies (like devaluation or tariffs) aimed at shifting consumption from imports to domestic goods.

Question 28

What is the Marshall-Lerner Condition?

Answer 28

A condition stating that a depreciation will improve the current account if the sum of PEDs for exports and imports > 1.

Question 29

What is the J-Curve?

Answer 29

Shows how the current account may worsen after a depreciation before improving

Question 30

What is a Trading Bloc?

Answer 30

A group of countries that have agreed to reduce trade barriers between them.

Question 31

What is a Preferential Trade Agreement?

Answer 31

Trade agreement that gives preferential access to certain products from participating countries.

Question 32

What is a Free Trade Area?

Answer 32

A group of countries that remove trade barriers among themselves (e.g.

Question 33

What is a Customs Union?

Answer 33

Free trade area + common external tariff on imports from non-members (e.g.

Question 34

What is a Common Market?

Answer 34

Customs union + free movement of labor and capital (e.g.

Question 35

What is a Monetary Union?

Answer 35

Common market + common currency and central bank (e.g.

Question 36

What are Terms of Trade (ToT)?

Answer 36

The ratio of a country's average export prices to its average import prices (ToT = Export Price Index / Import Price Index × 100).

Question 37

What is an Improvement in ToT?

Answer 37

When export prices rise relative to import prices.

Question 38

What is a Deterioration in ToT?

Answer 38

When import prices rise relative to export prices.

Question 39

What is Economic Growth?

Answer 39

An increase in a country’s output (real GDP) over time.

Question 40

What is Economic Development?

Answer 40

A broad concept including improvements in living standards

Question 41

What is Sustainable Development?

Answer 41

Development that meets current needs without compromising future generations' ability to meet theirs.

Question 42

What is Multilateral Aid?

Answer 42

Aid provided through international organizations (e.g.

Question 43

What is Bilateral Aid?

Answer 43

Aid given directly from one country to another.

Question 44

What is Tied Aid?

Answer 44

Aid that must be spent on goods and services from the donor country.

Question 45

What is Microfinance?

Answer 45

Small loans provided to the poor

Question 46

What is Foreign Direct Investment (FDI)?

Answer 46

Investment by multinational corporations in physical capital or assets in another country.

Question 47

What is Foreign Aid?

Answer 47

Assistance provided by governments or organizations to support economic development in less developed countries.

Question 48

What is Import Substitution Industrialization (ISI)?

Answer 48

A strategy that encourages domestic production of goods to replace imports.

Question 49

What is Export-Oriented Industrialization (EOI)?

Answer 49

A strategy focusing on producing goods for export to drive economic growth.

Question 50

What is the Poverty Cycle?

Answer 50

A self-reinforcing mechanism where low income leads to low savings