Essential Macroeconomics and International Trade Terms

Key Macroeconomic Indicators and Concepts

• GDP (Gross Domestic Product): The volume of production within a country’s borders; it includes everything produced in a country regardless of the origin of the factor of production.
• GNP (Gross National Product): The value of all final goods and services produced by a country’s factors of production and sold in the market in any given period.
• Consumption: The portion of GNP purchased by private households.
• Investment: The portion of production consumed by private companies to produce their own output.
• Government Purchases: All the consumption and investment activities of local and national authorities.
• Unemployment: The ratio between people actively seeking employment and the active population.
• Productivity: The value of what is being produced versus the value of the resources used to produce it.
• Inflation: An increase in the general price level of goods and services in an economy over a period of time.
• Industrial Production: The output of industrial establishments, covering sectors such as mining, manufacturing, and public utilities.
• Household Disposable Income: The sum of household final consumption expenditure and savings, minus the change in net equity of households in pension funds.
• Interest Rate: The price of money, often reflected in the yield of bonds.
• Exchange Rate: The price of one currency in terms of another currency.

Levels of Economic Integration

Economic integration is the unification of economic policies between different states through the partial or full abolition of tariff and non-tariff restrictions on trade. This process involves not only trade but also macro policies, including:

• Free Trade Area: Trade barriers among member countries are removed, but each country maintains its own barriers with third countries.
• Customs Union: Members not only remove trade barriers among themselves but also adopt a common set of external barriers.
• Common Market: Allows the full freedom of factor flows, including capital and labor.
• Economic Union: Member countries unify all their economic policies, including monetary, fiscal, and welfare systems.

International Trade and Organizations

• GATT (General Agreement on Tariffs and Trade): A framework for the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis."
• WTO (World Trade Organization): An intergovernmental organization that regulates international trade.
• Dumping: This occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production.
• Most-Favored Nation (MFN): The principle of treating all trading partners equally.