International Economics Chapters 1-6 From Carbaugh

Front 1

Agglomeration Economies

Back 1

a rich country specializes in manufacturing niches and gains productivity through groups of firms clustered togehter.

Front 2

Economic Interdependence

Back 2

all aspects of a nation's economy are linked to the economies or its trading partners

Front 3

Globablization

Back 3

the process of greater interdependence among countries and their citizens

Front 4

Law of Comparative Advantage

Back 4

when each nation specializes in teh production of a good in which it has relative advantage--and in turn, all countries benefit

Front 5

Openness

Back 5

the ratio of a nations exports and imports as a percentage of its GDP

Front 6

Autarky

Back 6

a case of national self-sufficiency or absence of trade

Front 7

Basis for Trade

Back 7

why nations export and import certian products

Front 8

Commodity terms of Trade

Back 8

measures the relationship between the prices a nation gets for its exports and the prices it pays for its imports

Front 9

community indifference

Back 9

the curve that represents the tastes and preferences of all the households of a nation

Front 10

complete specialization

Back 10

a situation in which a country produces only one good

Front 11

constant opportunity costs

Back 11

a constant rate of sacrifice of one good for another as a nation slides along its production possibilies schedule

Front 12

consumption gains

Back 12

post-trade comsumption points outside a nations production possibilities schedule

Front 13

dynamic gains from international trade

Back 13

the effect of trade on the countries growth rate (and on the volume of additional resources made available by the trading country)

Front 14

exit barriers

Back 14

cost conditions that make lengthy industry exit a rational response by companies

Front 15

free trade

Back 15

a system of open markets between countries in which countries concentrate their production on goods they can make the most cheaply

Front 16

gains from international trade

Back 16

gains trading partners simultaineously enjoy dur to specialization and the division of labor

Front 17

importance of being unimportant

Back 17

when one trading nation is significantly larger than the other--the larger nation attains fewer gains from trade than the smaller one

Front 18

increasing opportunity costs

Back 18

when each additional unit of one good produced requires the sacrifice of increasing amounts of the other good

Front 19

indifference curve

Back 19

a curve depicting the various combinations of two commodities that are equally preferred in the eyes of the consumer

Front 20

labor theory of value

Back 20

the cost or price of a good depends exclusively on the amount of labor required to produce it

Front 21

marginal rate of transformation(mrt)

Back 21

the of the production possibilites schedule that shows the amount of one product a nation must sacrifice to get one additional unit of the other product

Front 22

mercantilists

Back 22

believe that a nation could regulate its domestic and international affairs so as to promote its own intresets through a strong foriegn trade sector

Front 23

no-trade boundary

Back 23

the terms of trade limit at which a country will cease to export a good

Front 24

outer limits for the equilibrium terms of trade

Back 24

defined by the domestic cost ratios of trading nations

Front 25

partial specialization

Back 25

when a country specializes only partially in the production of a good in which it has the comparative adv

Front 26

price-specie-flow doctrine

Back 26

Hume's theory that a favorable balance of trade was possible only in the short run, and that eventually it would be automatically eliminated via chages in product prices

Front 27

principal of absolute adv

Back 27

in a two nation, two product world, international specialization and trade will be benefitial when one nation has an absolute cost advantage in one good and the other nation has an absolute cost adv in the other

Front 28

production gains

Back 28

increases in production resulting from specialization in the product of compartive adv

Front 29

production possibilites schedule

Back 29

shows various alternative combinations of two goods that a nation can produce when all of its factor inputs are use din their most efficient manner

Front 30

region of mutually beneficial trade

Back 30

the area that is bounded by the cost ratios of the two trading countries

Front 31

terms of trade

Back 31

the relative prices at which two products are traded

Front 32

theory of reciprocal demand

Back 32

relative demand conditions determine what the actual terms of trade will be within the outer limits of the terms of trade

Front 33

trade triangle

Back 33

an area in a production possibilites diagram showing a countries exports, imports, and equlibrium of trade

Front 34

trading possibilies line

Back 34

a line in a production possibilities diagram representing the equilibrium terms-of-trade ratio

Front 35

buisness services

Back 35

non storable or intangible products ie, tourism, banking etc

Front 36

capital/labor ratio

Back 36

a country's ratio of capital inputs to labor inputs

Front 37

distribution of income

Back 37

the distribution of wages earned across a country

Front 38

dynamic comparitive adv

Back 38

a changing pattern in comp adv, govts can establish policies to promote opportunities for changes in comparative adv over time

Front 39

economics of scale

Back 39

when increasing all inputs by the same proportion results in a greater proportion of total output

Front 40

factor-endowment theory

Back 40

asserts that a country exports those goods that use its abundant factor more intensively

Front 41

factor-price equalization

Back 41

the tendency in free trade to cause cheap factors of production to become more expensive, and the expensive ones to become cheaper

Front 42

heckscher-ohlin theory

Back 42

differences in realtive factor endowments among nations underlie the basis dor trade

Front 43

home market effect

Back 43

countries will specialize in products for which there is a large domestic demand

Front 44

increasing returns to scale

Back 44

when increasing all inputs by the same proportion results in a total output to increase by a greater proportion

Front 45

industrial policy

Back 45

government policy that is actively involved in creating comparative advantage

Front 46

inter vs intraindustry specialization

Back 46

inter- when each nation specializes in its industry of most profit, intra- focusing on the production of products within a given industry

Front 47

inter vs intraindustry trade

Back 47

inter- trade btw nations intra, two way trade in a similar commodity

Front 48

leontief paradox

Back 48

exports are less capital intensive than import-competing goods---contradicts the factor-endowment thoery

Front 49

product life cycle theory

Back 49

the cycle where manufactured goods for the home country are exports, then looses comparative adv and the product becomes an import

Front 50

specific factors theory

Back 50

considers the income-distribution effects of trade when factor inputs are immobile among industries in the short run

Front 51

theory of overlapping demands

Back 51

nations with similar per capita incomes will have overlapping demans structures & will likely consume the same manufactured goods (ie wealthy nations trade with wealthy ones and poor with poor)

Front 52

transportation costs

Back 52

the costs of moving goods from one nation to another