Chapter 13: INTERNATIONAL TRADE

Question 1

The expanding cultural, political, and economic connections between people around the world; including the process of international integration or increased mobility across national borders of products, workers, capital, and technology.

Answer 1

globalization

Question 2

The goods and services that one produces abroad and then sells domestically

Answer 2

imports

Question 3

The goods and services that one produces domestically and sells abroad

Answer 3

exports

Question 4

The buying and selling of goods between countries, measures the balance of trade

Answer 4

trade flows

Question 5

The trade of intangible products, such as telecommunications or information technology

Answer 5

trade in services

Question 6

Investments by a firm or individual in one country into an entity based in another country (e.g., treasury bills owned by foreign countries, foreign bonds, and foreign stocks)

Answer 6

foreign direct investment (FDI)

Question 7

An economic practice that seeks to maximize exports and minimize imports

Answer 7

mercantilism

Question 8

When a country or person can produce more of a good than anyone else with the same amount of resources; can be the result of a country’s natural endowment

Answer 8

absolute advantage

Question 9

When a country or person can produce a good at a lower opportunity cost than anyone else; it can produce a good at a lower cost in terms of other goods

Answer 9

comparative advantage

Question 10

Trade gives each country the ability to consume more

Answer 10

gain from trade

Question 11

When an entity has economic independence; they are self-sufficient and not open to trade

Answer 11

autarky

Question 12

Focus on your biggest advantage and sell that to other countries

Answer 12

Ricardo’s theory

Question 13

Trade occurs due to differences in endowments (mainly labor and capital) across countries

Answer 13

Heckscher-Ohlin theory

Question 14

As prices of output goods are equalized between countries as they move to free trade, the prices of the factors (capital and labor) will also be equalized

Answer 14

factor price equalization theory

Question 15

A rise in the relative price of a good will lead to a more than proportional rise in the return of the factor used intensively in the production of that good

Answer 15

Stolper-Samuelson theory

Question 16

When a company entrusts some part of their business process to an outside vendor (third party)

Answer 16

outsourcing

Question 17

When a company does some part of their business process in a different country than where they are based

Answer 17

offshoring

Question 18

Policies that often seek to shield domestic producers and domestic workers from foreign competition.

Answer 18

protectionism

Question 19

Taxes that governments place on imported goods; either a specific tax or an ad valorem tax

Answer 19

tariffs

Question 20

Numerical limitations on the quantity of products that a country can import

Answer 20

import quotas

Question 21

All the other ways that a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products

Answer 21

nontariff barriers

Question 22

A forum in which nations could come together to negotiate reductions in tariffs and other barriers to trade

Answer 22

General Agreement on Tariffs and Trade (GATT)

Question 23

Participants allow each other’s imports without tariffs or quotas

Answer 23

free trade agreements

Question 24

Participants have a common external trade policy as well as free trade within the group

Answer 24

common markets

Question 25

In addition to a common market, monetary and fiscal policies are coordinated

Answer 25

economic unions

Question 26

A new technology that causes real tradeoffs

Answer 26

disruptive market change

Question 27

Selling goods below their cost of production

Answer 27

dumping

Question 28

Block imports that are sold below the cost of production by imposing tariffs that increase the price of these imports to reflect their cost of production

Answer 28

anti-dumping laws

Question 29

Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits

Answer 29

race to the bottom