Int'l Trade, Ch 8-11

Front 1

Trade deflection

Back 1

the diversion of exports to a country within a FTA that has lower tariffs on a specific good

Front 2

Determining what country actually produced a good is known as the ....

Back 2

rules of origin

Front 3

Trade creation (TC)

Back 3

occurs when two countries mutual eliminate tariffs and nontariff barriers to trade thus increasing the trade between the countries

Front 4

Trade creation _______ world welfare and trade diversion _______ world welfare

Back 4

increases , decreases

Front 5

If the area of (a + b) is greater than the area of c

Back 5

world welfare will increase

Front 6

If the area of c is greater than the area (a + b)

Back 6

world welfare will decrease

Front 7

Common currency is only one of the characteristics of an economic union
It still needs ...

Back 7

a common fiscal policy,
common levels of business taxation,
common labor laws,
and
commonality in other regulations that distort economic activity

Front 8

effects of NAFTA

Back 8

-The agreement gives Canada unrestricted access to larger market allowing their firms to grow larger
-Trade with Mexico has long run appeal to the U.S. and Canada
-Mexican economy is growing much faster than the U.S. or Canada
-Mexico sees NAFTA as a way to advance export-led growth

Front 9

MULTILATERALISM VERSUS REGIONAL TRADE AGREEMENTS

Back 9

-As countries spend more time on RTAs, they will spend less time on WTO matters
-This makes obtaining multilateral agreements more difficult
-However, RTAs are legal under WTO rules and trade creation generally exceeds trade diversion
-Their popularity may be because governments prefer them
-The adjustment costs for domestic industries may be lower with RTAs than with MTNs

Front 10

common external tariff

Back 10

each country replaces its national tariff schedule with common tariff schedule applicable to all member countries

Front 11

Customs unions are broad but ....

Back 11

may not include trade in agricultural products, services and financial flows

Front 12

common market

Back 12

customs union with the addition of factor mobility between member countries
-allows more efficient allocation of capital and labor
-However, large wage differentials may induce large amount of migration between countries

Front 13

customs union

Back 13

an agreement between countries to maintain a free-trade area and to construct and maintain a common external tariff

Front 14

free-trade areas (FTAs)

Back 14

the countries agree to eliminate tariffs and other non-tariff barriers between each other

Front 15

Levels of Economic Integration

Back 15

Front 16

Economic development is defined as ...

Back 16

the goal of attaining a standard of living roughly equivalent to that of the average citizen in a developed country

Front 17

Average income can be measured using...?

Back 17

per capita GDP

Front 18

first goal of economic development is ...

Back 18

the alleviation of the dire conditions billions face in developing countries

Front 19

There are two important preconditions for economic growth

Back 19

property rights and
the rule of law

Front 20

If property rights are not being properly enforced

Back 20

far fewer transactions occur with the result of a lower level of economic activity

Front 21

In order for an economy to grow, it needs ....

Back 21

resources – factors of production

Front 22

An increase in the labor force will tend to increase ....

Back 22

GDP

Front 23

The relationship between GDP and factors of production is called the ...

Back 23

production function

Front 24

Businesses generally use loan proceeds to invest in structure and/or equipment
This increases ....

Back 24

capital stock and the production function shifts upwards

Front 25

The more a country trades,

Back 25

the faster the economy should be able to grow

Front 26

Openness causes:

Back 26

-an improvement in technology,
-Improved technology leads to improved total factor productivity, getting more outputs from the same inputs
-trade and growth

Front 27

The prices of primary products tend to be

Back 27

volatile

Front 28

For many countries, primary products are a _______percentage of exports or GDP

Back 28

high

Front 29

Import Substitution

Back 29

The purpose of an import substitution development strategy is to increase the relative size of the manufacturing sector

Front 30

Export Promotion

Back 30

A development strategy based on developing industries in line with the country’s comparative advantage

-More effective than import substitution

Front 31

export promotion has a number of advantages:

Back 31

-More resources flow into the comparative advantage sectors and away from comparative disadvantage
-Faster economic increase the rate of job creation
-May improve the country’s chance of creating a more favorable balance between exports and imports
-It works better than import substitution!

Front 32

Developed countries can assist developing countries though what is popularly known as ... ?

Back 32

foreign aid

Front 33

official development assistance (ODA)

Back 33

Is the correct term for this transfer of resources from developed countries to developing countries to assist in the process of economic developmen

Front 34

International Development Association (IDA)

Back 34

provides no-interest loans to low-income countries for infrastructure

Front 35

International Finance Corporation (IFC)

Back 35

invests in business opportunities in developing countries that may be underserved without IFC participation

Front 36

Multilateral Investment Guarantee Agency (MIGA)

Back 36

promotes FDI by providing guarantees to foreign investors