IB International - Economic Terms and Concepts

Appreciation (of a currency)

• A decrease in the value of a currency, making imports more expensive and exports cheaper.

• An increase in the value of a currency, making imports cheaper and exports more expensive.

• A stable value of a currency, resulting in no change in import or export prices.

• A fluctuation in the value of a currency, causing uncertainty in trade.

Fixed exchange rate

• An exchange rate regime in which a currency’s value is pegged to another currency or basket of currencies.

• A system where currency values fluctuate freely based on market forces.

• A method of trading currencies without any fixed rates.

• A policy that allows for the complete abandonment of currency values.

Foreign aid

• Financial or technical assistance given by governments and other agencies to support economic, environmental, social, and political development in developing countries.

• A type of investment made by private companies in foreign markets.

• A loan provided by international banks to developing countries with high interest rates.

• A form of charity that involves sending food and clothing to impoverished nations.

Subsidy (in trade context)

• A tax imposed on imported goods to protect domestic industries.

• A payment by the government to domestic producers to lower their production costs and make them more competitive internationally.

• A financial penalty for companies that exceed production limits.

• A grant provided to foreign companies to encourage investment in the domestic market.

Multinational corporation (MNC)

• A firm that owns or controls production or services in more than one country.

• A company that operates only in its home country.

• A business that only exports goods to other countries.

• A local business that has no international presence.

Microcredit

• Small loans extended to impoverished borrowers who typically lack collateral, used as a tool for poverty alleviation.

• Large loans provided to wealthy individuals for investment purposes.

• Grants given to businesses to promote economic growth.

• Interest-free loans offered to students for education.

Debt forgiveness

• The cancellation of all or part of a country’s debt by a creditor, often to relieve pressure on heavily indebted developing countries.

• A financial strategy to increase a country's GDP by taking on more debt.

• A legal process to declare a country bankrupt and sell its assets.

• A method for countries to negotiate lower interest rates on existing loans.

Trade liberalisation

• The establishment of trade barriers to protect domestic industries.

• The removal or reduction of trade barriers such as tariffs, quotas, and subsidies to encourage free trade between nations.

• The implementation of strict regulations on international trade.

• The promotion of local products over foreign imports.

Capital account

• A component of the balance of payments that includes transfers of capital and acquisition/disposal of non-produced, non-financial assets.

• A record of all financial transactions between residents of a country and the rest of the world.

• A measure of the total value of goods and services produced in a country.

• A section of the balance of payments that records the trade of physical goods.

Infrastructure

• The basic physical and organisational structures needed for the operation of a society, such as transportation, communication, water, and power systems.

• A type of software that manages computer hardware and software resources.

• A financial system that supports economic growth and development.

• A set of laws and regulations governing a specific industry.