IA2 Economics Glossary summary

Balance of Payments

• A financial statement summarising a country's economic transactions with the rest of the world
• Includes the current account, capital account, and financial account

Balance of Trade

• The difference between a country's exports and imports of goods
• Positive balance = trade surplus
• Negative balance = trade deficit

Capital and Financial Account

• Records transactions related to investments and financial assets between a country and the rest of the world

Current Account

• Captures trade in goods and services, plus transfers like remittances and foreign aid

Current Account Deficit

• Occurs when a country imports more goods, services, and capital than it exports

Foreign Investment

• Investments made by individuals or entities in another country, including direct investment in businesses or indirect investment in government bonds

Foreign Debt

• The amount borrowed by a country from foreign lenders

Free Trade Agreements

• Treaties between two or more countries to create a free-trade area, facilitating trade without tariffs or hindrances

Trading Blocs

• Groups of countries with a specific trade agreement aimed at reducing or eliminating trade barriers

Methods of Trade Protection

• Mechanisms used by governments to restrict international trade, often to protect domestic industries. These include tariffs, quotas, and subsidies.

Tariffs

• Taxes on imported goods, increasing their cost to protect domestic industries

Non-Tariff Barriers

• Trade barriers that restrict imports but aren't taxes. Examples include quotas, subsidies, and bureaucratic requirements

Subsidies

• Financial assistance from the government to domestic industries, making them more competitive against foreign imports

Quotas

• Quantitative limits set by a government on imported goods

Bureaucratic Requirements

• Administrative rules and regulations acting as barriers to trade, such as product standards and customs procedures

Terms of Trade

• The ratio of a country's export prices to its import prices. It shows how much a country can buy of its exports

Protectionism

• The policy of protecting domestic industries against foreign competition using methods like tariffs, quotas, and subsidies

Trade Liberalisation

• The removal or reduction of trade barriers to encourage free trade

Bilateral Agreements

• Trade agreements between two countries aimed at reducing or eliminating trade barriers

Regional Agreements

• Trade agreements among multiple countries in a specific geographic region

Multilateral Agreements

• Trade agreements involving multiple countries, often on a global scale

Trade Creation

• Increase in economic activity due to the removal of trade barriers

Trade Diversion

• Shift in trade from a more efficient to a less efficient source, often due to trade agreements or tariffs

Economic Efficiency

• Optimal allocation of resources in an economy to maximize output or minimize waste.

Economic Growth

• Increase in an economy's output (GDP)

Living Standards

• The level of wealth, comfort, and well-being experienced by individuals or communities

Resource Allocation

• How resources (labor, capital, raw materials) are distributed in an economy

Current and Capital Account Statements

• Financial statements detailing a country's economic transactions, categorized into current and capital accounts

Australia-New Zealand Closer Economic Relations Trade Agreement (CER)

• A free trade agreement between Australia and New Zealand aimed at promoting trade and economic integration

European Union (EU)

• Political and economic union of 27 European countries with a single market and customs union

North American Free Trade Agreement (NAFTA)

• A trade agreement among the United States, Canada, and Mexico (replaces by USMCA)

ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA)

• A trade agreement involving countries from the Association of Southeast Asian Nations (ASEAN), Australia, and New Zealand