1- Developed nation = industrialised, advanced nation, like Germany, the US, etc. A developing nation is a country that has not yet reached that level, like much of Africa. You might be familiar with the term 'Third World'- it has a sinilar meaning, but is less used nowadays.
2 The domestic production in that country in not very efficient- you could buy a foreign product for half the price.
3 economics- the subject
economy- waht econmists look at- you can have a geaographical one, like the German economy, or an industry one.
economic- the adjective- Germany has had economic problems since reuinification
economical- saving money or not spending much- an econmoical car doesn't use much petrol
4- politics is the whole area, while policy is what is actually done in a specific area- the economic policy, for instance.
5- Blue collar- manual labourers
white collar - office workers