IB Economics Revision

The Global Economy

International trade, exchange rates, the balance of payments and economic development.

The Global Economy is a core part of IB Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.

Key concepts

FTAFree trade area — no internal tariffs
Customs unionFTA plus common external tariff
Common marketCustoms union + factor mobility
Monetary unionCommon market + single currency
Trade creationSwitch from costly home to cheap partner
Trade diversionSwitch from cheap non-member to costly member
Current accountTrade, income, transfers — flows
Capital accountAsset transfers, debt forgiveness
Financial accountCross-border asset transactions
Floating rateCurrency price set by market supply / demand
AppreciationCurrency rises under a floating regime
J-curveDepreciation worsens CA before improving it
Absolute advantageProduces more with same resources
Comparative advantageLower opportunity cost

Common mistakes to avoid

Questions where students often pick the tempting wrong answer — make sure you know the right one:

What does economic scarcity mean?✗ Simply that something is rare.   ✓ Unlimited wants exceed limited resources, forcing choices.
What is opportunity cost?✗ Only the money price of an item.   ✓ The next best alternative given up when you make a choice.

Practise The Global Economy — free games

Test yourself with these quick revision games for this topic:

▶ Two Truths, One Lie▶ Reveal Race▶ Connections Grid▶ Falling Words▶ Word Web

See all 17 games in the Subjects Arcade →

More IB Economics topics

Introduction to EconomicsMicroeconomicsFirms & Market StructuresMacroeconomicsHL Extension & Quantitative

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