ECONOMIC PRINCIPLES 1. absolute advantage (HL) a situation where a country can produce a good using fewer resources than another country 2. account deficit a situation where the outflows of money on a component of the balance of payments are greater than the inflows 3. account surplus a situation where the outflows of money on a component of the balance of payments are less than the inflows 4. administrative barriers government laws or procedures that may result in reduced trade 5. appreciation when the price of one countryfis currency rises against another countryfis currency in a floating exchange rate regime 6. balance of payments a record of the value of all the transactions between the residents of one country and the residents of all other countries in the world in a given time
7. balance of trade in goods (visible balance) a component of the current account; a measure of the revenue received from the export of physical goods minus the expenditure on the imports of physical goods 8. balance of trade in services (invisible balance) a component of the current account; a measure of the revenue received from the export of services minus the expenditure on the imports of services 9. bilateral trade agreement an agreement relating to trade between two countries 10. capital account a component of the balance of payments consisting of capital transfers and transactions in non-produced, non-financial assets 11. common market a customs union with common policies on product regulation and the free movement of
factors of production, as well as goods and services 12. comparative advantage (HL) a situation where a country can produce a good with a lower opportunity cost than another country 13. convertible currency a currency that is widely accepted in exchange for other countriesfi currencies 14. credit item any exchange transaction that leads to money coming into a country (a positive value on the balance of payments) 15. current account a component of the balance of payments that measures the flow of funds from trade in goods and services, plus other income flows and transfers 16. current transfers movement of money to or from another country, where no goods or services are exchanged 17. customs union a trading bloc where the countries agree to trade freely among themselves and agree to adopt common external barriers against other countries not in the bloc 18. debit item any exchange transaction that leads to