Macroeconomics5

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comparative advantage

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a situation in which a person or country can produce a specific product at a lower opportunity cost than some other person or country

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terms of trade

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the rate at which units of one product can be exchanged for units of another product

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foreign exchange market

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a market in which various national currencies are exchanged for one another

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exchange rates

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the rate at which the currency of one nation can be exchanged for the currency of another nation

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depreciation

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a decrease in the value of the dollar relative to another currency, so a dollar buys a smaller amount of the foreign currency and therefore of foreign goods

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appreciation

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an increase in the value of the dollar relative to the currency of another nation, so a dollar buys a larger amount of the foreign currency and thus of foreign goods

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protective tariffs

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excise taxes or duties placed on imported goods

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import quotas

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limits on the quantities or total value of specific items that may be imported

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nontariff barriers

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include onerous licensing requirements, unreasonable standards pertaining to product quality, or simply bureaucratic hurdles and delays in customs procedures

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export subsides

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consist of government payments to domestic producers of export goods

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Smoot-Hawley Tariff Act of 1930

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Legislation passed in 1930 that established very high tariffs. Its objective was to reduce imports and stimulate the domestic economy, but it resulted only in retaliatory tariffs by other nations

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Reciprocal Trade Agreements Act of 1934

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A 1934 Federal law that authorized the president to negotiate up to 50 percent lower tariffs with foreign nations that agreed to reduce their tariffs on U.S. goods

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normal-trade-relations (NTR) status

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a designation for countries that are allowed to export goods and services into the U.S. at the lowest tariff rates available to any other country allowed to export those goods to the U.S.

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General Agreement on Tariffs and Trade (GATT)

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The international agreement reached in 1947 in which 23 nations agreed to give equal and nondiscriminatory treatment to one another, to reduce tariff rates by multinational negotiations, and to eliminate import quotas. Now includes most nations and has become the WTO.

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World Trade Organization (WTO)

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oversees trade agreements reached by the member nations and rules on trade disputes among them

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Doha Round

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the latest uncompleted sequence of trade negotiations by member of the WTO

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European Union (EU)

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an association of 27 European nations that has eliminated tariffs and quotas among them, established common tariffs for improted goods from outside the member nations, eliminated barriers to the free movement of capital, and created other common economic policies

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trade bloc

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a group of countries having common identity, economic interests, and trade rules

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euro

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the common currency of 15 countries in the EU

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North American Free Trade Agreement (NAFTA)

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a 1993 agreement establishing, over a 15-year period a free-trade zone composed of Canada, Mexico, and the U.S.

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Trade Adjustment Assistance Act

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a U.S. law passed in 2002 that provides cash assistance, education, and training benefits, health care subsides, and wage subsides to workers displaced by imports or relocations of U.S. plants to other countries

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offshoring

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shifting work previously done by American workers to workers located in other nations