Definitions

Chinese Economy

 

THE GLOBAL ECONOMY

Global/World Economy-Consists of all countries in the world that produce goods and services and contribute to Gross World Product (GWP) or global output. Where the economies of individual countries are linked to each other and changes in a single economy can have ripple effects on others

Gross World Product(GWP)- The sum of total output of goods and services in the world over a period of time

Economic Integration– The liberalisation of trade between two or more countries. Main benefits include-Increased trade, Investment flows and rising standards of living

Globalization-Integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity

International Business Cycle-The fluctuations in the levels of economic activity in the global economy overtime

Regional Business Cycle-The fluctuations in the levels of economic activity in a geographical region of the global economy overtime

Speculators-Investors who buy or sell financial assets with the aim of making profits from short term price movements. They are often criticised for creating excessive volatility in financial markets

Free Trade-The situation where governments impose no artificial barriers to trade that restrict the free exchange of goods and services between countries with the aim of shielding domestic producers from foreign competitors

Comparative Advantage-The economic principle that nations should specialise in the areas of production in which they have the lowest opportunity cost and trade with other nations so as to maximise both nations standards of living

Protection-any type of government action that has the effect of giving domestic producers an artificial advantage over foreign competitors e.g. tariffs, quotas, subsidies

Dumping-when a foreign firm attempts to sell their goods in another country’s market at “unrealistically low prices” i.e. below the price charged in the home country’s market

Tariff-Government imposed taxes on imports for the purpose of protecting industries. It has the effect of raising of raising the price of the imported goods making the domestic producers more competitive

Specific Tariff(or import duty)-imposes a fixed monetary (dollar) tax per unit of the good imported. e.g. $10 per T-Shirt

Ad Valorem Tariff-constant percentage of the monetary value of 1 unit of the good imported e.g. 20% tax on imported cars

Quotas-restrictions on the amounts or values of various goods that may be imported. It guarantees domestic producers a share of the market

Tariff Quotas-Goods imported up to the quota pay the standard tariff rate, whereas goods imported above the quota pay a higher rate

Subsidies-Cash payments from the government to businesses to encourage the production pf a good or service and influence the allocation of resources. Often granted to domestic producers and businesses which enables them to reduce their selling price and compete with overseas goods and services

Local Content Rules-Rules that specify that goods must contain a minimum percentage of locally made goods. In return for guaranteeing that a certain percentage of a good will be locally made, the imported component may not attract a tariff

Export incentives-Programs that give domestic producers assistance such as grants, loans or technical advice(such as marketing or legal information) and encourage business to penetrate global markets or expand their market share.

Free Trade agreements(or preferential trade agreements)-formal agreements between countries designed to break down barriers to trade between those nations. They can be bi-lateral, multilateral, regional or global

Trade Blocs-When a number of countries join together in a formal preferential arrangement to the exclusion of other countries e.g. EU, NAFTA

AUSTRALIA’S PLACE IN THE GLOBAL ECONOMY

Balance of Payments-The record of the transactions between Australia and the rest of the world during a given period, consisting of the current account and the capital and financial account.

Current Accounts-The part of the balance of payments that shows receipts and payments for trade in goods and services, transfer payments and income flows between Australia and the rest of the world in a given time period. These are non-reversible transactions

 

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