BWR Terms Flashcards
Inflation
The prices of goods and services rise over time. This happens because the overall value of money decreases as prices go up.
2 Types of Exchange Rates
Fixed exchange rate
Floating exchange rate
Floating exchange rate
the value of a country’s currency is allegedly set by the foreign exchange market through supply and demand for that particular currency
Fixed exchange rate
A rate the central bank (government) sets and maintains the official exchange rate
Two implications for a currency devaluation
- A country’s exports are relatively less expensive for foreigners
- foreign products become relatively more expensive for domestic consumers, discouraging imports
Devaluation
may help reduce a country’s trade deficit (when a country imports more than it exports)
Trade deficit
when a country imports more than it exports
Protectionism
Government actions and policies that restrict or restrain international trade or allowing foreign goods to enter into a country
How is Protectionism implemented
Import tariffs
quotas
currency devaluations
Beggar-thy-neighbor
a policy where one country tries to improve its own economy by making things worse for other countries. This is usually done through things like raising tariffs (taxes on imports) or devaluing the country’s currency to make its products cheaper abroad. (fixing your problems by causing problems for your neighbors).
The Bretton Woods regime
an international financial system set up after World War II to stabilize the global economy. Countries agreed to fix the value of their currencies to the US dollar, and the US dollar was backed by gold
The General Agreement on Tariffs and Trade (GATT)
Was an international agreement aimed at promoting free trade by reducing tariffs (taxes on imports) and other trade barriers between countries. (trying to fight protectionism).
Fordism
about making things fast and efficient while ensuring workers are paid well enough to be customers.
Keynesianism
governments can help manage the economy by adjusting spending and taxes.
Import Substitution Industrialization (ISI)
aims to boost a country’s economy by producing goods locally instead of importing them from abroad via local production, reducing imports and creating jobs.
