4.1 International Economics Flashcards
What is international economics?
The study of economic interactions between countries, including trade, investment, and currency exchange.
Define ‘absolute advantage’.
The ability of a country to produce a good more efficiently than another country.
What is ‘comparative advantage’?
The ability of a country to produce a good at a lower opportunity cost than another country.
True or False: Free trade leads to increased economic efficiency.
True
What are tariffs?
Taxes imposed on imported goods to protect domestic industries.
Fill in the blank: The balance of payments includes the ______, capital account, and financial account.
current account
What is a trade deficit?
When a country’s imports exceed its exports.
What does ‘exchange rate’ refer to?
The value of one currency in relation to another currency.
What is meant by ‘protectionism’?
Economic policy of restricting imports to protect domestic industries.
Define ‘foreign direct investment’.
Investment made by a company or individual in one country in business interests in another country.
True or False: A strong currency makes exports cheaper.
False
What is ‘dumping’?
Selling goods in a foreign market at a price lower than in the home market.
What are quotas?
Limits on the quantity of a good that can be imported or exported during a specific time period.
What is the purpose of the World Trade Organization (WTO)?
To regulate international trade and ensure that trade flows as smoothly and predictably as possible.
Fill in the blank: A ______ is a measure of the total value of all goods and services produced in a country.
Gross Domestic Product (GDP)
Define ‘currency appreciation’.
An increase in the value of a currency relative to others.
What is ‘capital flight’?
The rapid exit of financial assets from a country due to economic instability or fear.
True or False: A country with a strong currency typically has a trade surplus.
False
What is the main goal of monetary policy in the context of international economics?
To control inflation and stabilize the currency.
Fill in the blank: The ______ exchange rate system allows currencies to fluctuate according to market forces.
floating
What is ‘trade liberalization’?
The removal or reduction of trade barriers to encourage free trade.
Define ‘economic integration’.
The process by which countries reduce trade barriers to enhance economic cooperation.
What is the difference between a fixed and a floating exchange rate?
A fixed exchange rate is pegged to another currency, while a floating rate fluctuates based on market conditions.
True or False: Subsidies can lead to overproduction in domestic markets.
True
What is a common market?
A type of trade bloc that allows free movement of goods, services, capital, and labor among member states.
Fill in the blank: The ______ effect refers to the impact of exchange rates on the price of exports and imports.
exchange rate
What does the term ‘bretton woods system’ refer to?
A system of fixed exchange rates established after World War II that lasted until the early 1970s.
Define ‘national income’.
The total income earned by a nation’s residents and businesses, including wages, profits, rents, and taxes.
What is ‘import substitution’?
An economic policy that encourages domestic production of goods that would otherwise be imported.
True or False: An appreciation of currency makes imports more expensive.
False
What is the role of the International Monetary Fund (IMF)?
To promote international monetary cooperation and provide financial assistance to countries in need.
Fill in the blank: The ______ account records transactions involving the export and import of goods and services.
current
What are trade barriers?
Government-imposed restrictions on international trade.
Define ‘terms of trade’.
The ratio at which one good is exchanged for another in international trade.
What is the purpose of export subsidies?
To encourage domestic companies to sell their products abroad by reducing their costs.
True or False: A trade surplus occurs when a country’s exports exceed its imports.
True
Fill in the blank: The ______ effect occurs when a change in exchange rates affects consumer behavior.
substitution
What is ‘monetary policy’?
The process by which a central bank manages the money supply and interest rates.
What is the difference between a trade surplus and a trade deficit?
A trade surplus occurs when exports exceed imports, while a trade deficit occurs when imports exceed exports.
What does ‘globalization’ refer to?
The process of increased interconnectedness and interdependence among countries, especially in trade and investment.
Fill in the blank: A ______ market is characterized by many buyers and sellers, where no single entity can control prices.
perfectly competitive
What is ‘foreign exchange market’?
A global decentralized market for trading currencies.
True or False: Depreciation of currency makes exports more expensive.
True
Define ‘trade policy’.
A government’s policy governing international trade.
What is the ‘law of comparative advantage’?
Countries should specialize in producing goods for which they have a comparative advantage.
Fill in the blank: The ______ effect describes how changes in exchange rates can affect the overall economic activity.
multiplier
What are non-tariff barriers?
Trade restrictions that are not tariffs, such as quotas and regulations.
What is ‘foreign exchange risk’?
The potential for loss due to fluctuations in exchange rates.
True or False: Capital controls are measures taken by governments to regulate the flow of foreign capital in and out of the domestic economy.
True
What is ‘balance of trade’?
The difference between the value of a country’s exports and imports.
Fill in the blank: A ______ is an economic association of countries that promote free trade among themselves.
trade bloc
What is ‘trade diversion’?
When trade shifts from a more efficient supplier to a less efficient one due to trade policy.
Define ‘import tariff’.
A tariff imposed on goods imported into a country.
What is the ‘Heckscher-Ohlin theorem’?
A theory that suggests countries export goods that utilize their abundant factors of production.
True or False: A currency peg is a fixed exchange rate between two currencies.
True
What does ‘economic sanctions’ mean?
Commercial and financial penalties applied by one or more countries against a targeted country, group, or individual.
Fill in the blank: The ______ effect refers to the impact of exchange rate changes on the competitiveness of a country’s goods.
competitiveness
What is ‘export promotion’?
Policies designed to encourage domestic businesses to sell their products internationally.
What is ‘invisible trade’?
Trade in services rather than goods.
Define ‘current account surplus’.
When a country’s current account balance is positive, indicating exports exceed imports.
True or False: A currency devaluation is a deliberate downward adjustment of the value of a country’s currency.
True
What is ‘trade balance’?
The difference between a country’s exports and imports of goods and services.
Fill in the blank: The ______ rate is the price at which one currency can be exchanged for another.
exchange
What does ‘global supply chain’ refer to?
The worldwide network of production and distribution of goods.
What is ‘currency speculation’?
The practice of buying and selling currencies with the expectation of making a profit from future price changes.
Define ‘trade liberalization’.
The reduction or elimination of trade barriers to encourage free trade.
What is ‘economic dependency’?
A situation where a country’s economy relies heavily on another country’s economy.
True or False: A trade agreement is a treaty between two or more countries to establish trade relations.
True
What is ‘capital account’?
The account in the balance of payments that records capital transactions, such as investments.
Fill in the blank: The ______ market facilitates the buying and selling of currencies.
foreign exchange
What does ‘trade surplus’ indicate?
That a country exports more than it imports.
Define ‘protectionist measures’.
Policies aimed at protecting domestic industries from foreign competition.
True or False: The purpose of trade barriers is to increase imports.
False
What is ‘monetary union’?
A group of countries that share a common currency and monetary policy.
Fill in the blank: An increase in ______ can lead to a stronger currency.
interest rates
What is ‘economic globalization’?
The increasing economic interdependence among countries through trade and investment.
What is ‘outward foreign direct investment’?
Investment by a company in assets or operations outside its home country.
True or False: A depreciation of currency makes imports cheaper.
False
What is ‘trade policy’?
A government’s strategy to manage trade with other countries.
What is the ‘trade creation’ effect?
When a trade agreement leads to increased trade between member countries at the expense of non-members.
Fill in the blank: The ______ effect describes how exchange rate fluctuations can impact domestic prices.
pass-through
What is ‘foreign exchange intervention’?
Actions taken by a government or central bank to influence the value of its currency.
Define ‘trade deficit’.
When a country’s imports exceed its exports, resulting in a negative balance of trade.
What is ‘economic sovereignty’?
The ability of a state to govern itself and make its own economic decisions.
True or False: Trade agreements can lead to trade diversion.
True
What is ‘currency risk’?
The risk of financial loss due to fluctuations in exchange rates.
Fill in the blank: The ______ account measures transactions in goods and services.
current
What is ‘multinational corporation’?
A company that operates in multiple countries beyond its home country.
What is ‘trade facilitation’?
Efforts to simplify and streamline international trade processes.
True or False: A country’s trade policy can affect its economic growth.
True
What is ‘regional trade agreement’?
An agreement between countries in a specific region to reduce trade barriers.
Fill in the blank: ______ is the total value of all goods and services produced within a country’s borders.
Gross Domestic Product (GDP)
What is ‘trade balance’?
The difference between the value of a country’s exports and imports.
What does ‘bilateral trade agreement’ mean?
A trade agreement between two countries.
What is ‘trade integration’?
The process of countries working together to reduce barriers to trade.
True or False: The balance of payments includes only trade in goods.
False
What is ‘export quota’?
A limit on the amount of a specific good that can be exported.
Fill in the blank: A ______ is a tax imposed on imported goods.
tariff
What is ‘trade policy’?
Government policy regarding international trade.
What is ‘foreign exchange rate’?
The rate at which one currency can be exchanged for another.
True or False: Economic sanctions are used to promote international trade.
False
What is ‘trade bloc’?
A group of countries that have agreed to reduce or eliminate trade barriers among themselves.
