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ECONOMICS > 14.1: International Trade Benefits > Flashcards

14.1: International Trade Benefits Flashcards

1
Q
  • Terms of trade is the ratio of …
A

The ratio of the price of exports to the price of imports.

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2
Q
  • Net exports - the difference between …
A

The value of a country’s exports and the value of its imports.

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3
Q
  • Trade surplus (deficit) - when the value of …
A

Exports is greater (less) than the value of imports.

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4
Q
  • Foreign portfolio investments (FPI) are shorter-term investments by …
A

Individuals, firms, and institutional investors in foreign financial instruments such as foreign stocks and foreign government bonds.

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5
Q

Intra-industry (known as two-way trade) occurs when …

A

A country exports and imports goods in the same product category or classification.

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6
Q
  • Absolute advantage - a country’s ability to …
A

Produce a good or service at a lower absolute cost than its trading partner.

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7
Q
  • Comparative advantage - a country’s ability to …
A

Produce a good or service at a lower relative cost, or opportunity cost, than its trading partner.

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8
Q

The Ricardian model of trade incorporates …

A

Differences in technologies between countries, concludes that everyone benefits from trade.

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9
Q

What are the two models of trade?

A

The Ricardian model of trade

Heckscher-Ohlin model

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10
Q

Heckscher-Ohlin model of trade incorporates …

A

Endowment differences, concludes that there will be winners and losers from trade.

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11
Q

The main difference in factors of the Heckscher–Ohlin model and Ricardian model are?

A

The Heckscher–Ohlin model has two factors of production, labor and capital.

Unlike the Ricardian model that has only labor.

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12
Q

What are the Types of trade restrictions?

A
  1. Tariffs
  2. Quotas
  3. Export subsidies
  4. Voluntary export restraint (VER)
  5. Minimum domestic content
  6. Countervailing duties
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13
Q

What are the main Types of trading blocs and regional trading agreements?

A
  1. Free-trade area
  2. Customs union
  3. Common market
  4. Economic union
  5. Monetary union
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14
Q

Customs union can be characterised as?

A

Free-trade area + all member countries adopt a common set of trade restrictions with non-members.

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15
Q

Common market can be characterised as?

A

Customs union + all barriers to the movement of labor and capital goods are removed.

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16
Q

Economic union can be characterised as?

A

Common market + member countries establish common institutions and economic policy.

17
Q

Monetary union can be characterised as?

A

Economic union + member countries adopt a single currency

ECONOMICS (17 decks)

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