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28 Cards in this Set
- Front
- Back
- 3rd side (hint)
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What is Absolute Advantage?
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The ability to produce more of a given product using a given amount of resources.
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Ex. Should a wealthy country with many resources be self-sufficient, or should it trade for the goods it doesn't produce?
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What is Comparative Advantage?
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The ability to produce a product most efficiently given all the other products that could be produced.
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The country w/ the comparative advantage & not necessarily the absolute advantage that should specialize in producing the good.
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What is the Law of Comparative Advantage?
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The idea that a nation if better off when it produces goods & services for which it has a comparative advantage.
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Each nation can then use the money bo buy other goods that it cannot produce efficiently.
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What is an Export?
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A good that is sent to another country for sale
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The U.S. is world's leading exporter due to its diversified range of products including computer software , medical equipment , & adv. technology
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What is an Import?
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A good that is brought in from another country for sale.
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A country is wise to export more goods than it imports.
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What is a Trde Barrier?
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A trade restriction which is a means of preventing a foreign product /service from
entering a nation 's territory. |
3 forms of Trade Barrier are import quotas, voluntary export restaints, & tariffs.
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What is an Import Quota?
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A limit of the amount of good that can be imported
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Includes India , Pakistan, China, Egypt & Sudan.
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What is a Voluntary Export
Restraint (VER) |
A self-imposed limitation on the number of products shipped to a particular country.
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The country voluntarily decreases its exports in an attempt to reduce the chances that the importing country will set up trade barriers.
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What is a Customs Duty?
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A tax on certain items purchased abroad.
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"duty free" stores are at international borders and airports where countries agree to drop the tax on luxury items ( perfume, chocolate, liquor, tobacco)
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What is a Tariff?
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A tax on imported goods
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U.S. collects tariffs on steel, foreign made cars, and many other products that are brought into our country
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What is a Trade War?
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A cycle of increasing trade restrictions.
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Lead to substantial decrease in trade for both countries: ex. Smoot-Hawley Tariff 1930, Chicken Tariff 1963,
Beef War 1999, & Steel Tariff 2002 |
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What is Protectionism?
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The use of trade barriers to protect a nation's industries form foreign competition.
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Includes: protection of worker jobs, protecting infant industries, and safeguarding national
securities. |
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What is Infant-Industry?
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a new industry
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tariff shield new industry from the competition of mature rivals.
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What is the International Free Trade Agreement?(IFTA)
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An agreement that results from cooperation between at least two countries to reduce trade barriers and tariffs and to trade with each other.
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to reduce trade barriers in order to increase trade
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What is the World Trade Organization?
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A worldwide organization whose goal is freer global trade and lower tariffs.
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founded in 1995 to ensur compliance with GATT; negotiates new trade agreements, resolves trade disputes. From 1930-1995, the average tariff dropped from about 59% to 5%.
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What is the European Union?
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A regional trade organization made of European nations
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developed from 6 western European nations making up the Common Market. In 1986 they agreed to drop tariffs on one another's exports creating a single market- The EEC. In 1993 formed the EU (European Union) which has its own flag, anthem, and holiday "Europe Day" on May 9th & adopt Euro as currency in 2002.
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What is the Euro?
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A single currency that replaces individual currencies among members of the European Union.
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12 member nations of the EU adopted the Euro in 2002
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What is a Free-trade zone?
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A region where a group of countries agrees to reduce or eliminate trade barriers
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Ex. U.S.A., Canada, Mexico & China have adopted this policy
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What is NAFTA?
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An agreement that will eliminate all tariffs and other trade barriers between Canada, Mexico, & the U.S.
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Key Provisions include eliminating tariffs on farm products w/n 15 yrs., no auto tariffs w/n 10 yrs., special judges apptd. to resolve trade disputes, trucks to have free access across borders, no overriding national/state environmental, health or safety laws.
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What is an Exchange Rate?
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The value of a foreign nation's currency in terms of the home nation's currency.
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uses a Foreign Exchange Rate Table to calculate conversions
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What is Appreciation?
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An increase in the value of a currency
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Currency becoming "stronger" due to increasing value. Causes a nations products to become more expensive abroad.
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What is Depreciation?
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A decrease in the value of a currency.
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Currency becoming "weaker" due to decreasing value. Causes a nations products to become less expensive abroad.
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What is a Foreign Exchange Market?
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The banks and other financial institutions that facilitate the buying & selling of foreign currencies
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banks located around the world in New York, London, Paris, Singapore, Tokyo, & other cities closely linked via computers & telephones for transmitting market info & speeding up financial transactions
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What is a Fixed Exchange Rate System?
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A currency system in which governments try to keep the values of their currencies constant against one another.
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one country with a stable currency is at center while other countries fix/peg their exchange rates to the currency of this central country.
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What is a Flexible Exchange Rate System?
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A currency system that allows the exchange rate to be determined by supply & demand
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This system prevents exchange rates from falling into any prespecified range.
Includes U.S. dollar & Japanese Yen. |
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What is a Trade Surplus?
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The result of a nation exporting more than it imports.
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exporting more goods than it imports = positive trade balance
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What is a Trade Deficit?
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The result of a nation importing more than it exports.
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importing more than it exports = negative trade balance
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What is the Balance of Trade?
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The relationship between a nation's imports and its exports.
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Nations seek to keep a "_______ ___ _______" with values of imports equal to values of exports.
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