Chapter 2 Flashcards
What has led to countries becoming more economically interdependent than ever before in modern history?
World trade
What has world trade resulted in? (Two things)
- Countries often attempt to control trade
* Protectionism more likely as competition intensifies
True/False: World trade has always been very prevalent.
False
World trade was disrupted in the 1st half of the 20th century by what?
- Depression era (1930s)
- Two world wars
- Smoot-Hawley act raised U.S. tariffs; 60 countries retaliated
World trade was disrupted in the 2nd half of the 20th century by what?
Social Marxism vs. Capitalism
The U.S. stimulated world trade in what two ways?
- Spread capitalism after WWII
* World Trade Agreements
How did the U.S. spread capitalism after WWII?
- With the Marshall plan: aided Japan and undeveloped countries
- by making other countries’ economies stronger enabling them to buy more from the U.S.
What two world trade agreements stimulated world trade?
- GATT (General Agreement on Tariffs and Trade)
* WTO (World Trade Organization)
When did U.S. companies begin to export and make significant investments overseas?
1950s
What two fronts did U.S. multinational corporations face major challenges on and when did this occur?
- Resistance to investments
- Increasing competition in export markets
*1960s
In what countries was there increasing competition in export markets during the 1960s?
Japan, Germany, Newly industrialized countries (NIC) and developing countries
The U.S. role as an economic powerhouse was challenged on what two fronts?
- U.S. position in world trade
* U.S. trade deficit (importing more than exporting)
In 1950 the U.S. position was ___% of the world GDP.
In 2012 it was ____% of the world GDP.
39%
Less than 25%
When did the U.S. trade deficit begin and what was it in 2011?
- 1971
* over 700 billion
In the 1980s and 90s, three free trade zones were created. What are they?
1) NAFTA
2) AFTA
3) APEC
What are the OECD predictions of annual economic growth for the next 25 years: (there’s two)
These growths will result in economic power and influence moving from ______________ to _______________.
Developed countries - 3% per year
Developing countries - 6% per year
Industrialized nations to developing nations
What is: the system of accounts that records a nations international finance transactions?
Balance of payments
Which of the following are true for balance of payments:
1) Transactions recorded annually
2) Must always be in balance
3) A record of condition, not determinant of condition
All of them are true
List the three accounts of balance of payments and some examples of each.
1) Current account: exports, imports, services, funds
2) Capital account: investments and short-term capital
3) Reserves account: gold, foreign exchange, and liabilities
What is it called when a country sells more goods/services than it buys?
What are two results of this?
Trade surplus
1) Greater demand for the currency
2) Currency will appreciate in value (more valuable)
What is it called when a country buys more goods/services than it sells?
What are two results of this?
Trade deficit
1) Less demand for the currency
2) Currency will depreciate in value (less valuable)
What are attempts by a country to inhibit the entry of products and services from foreign companies by imposing trade barriers called?
List the three arguments for this act.
Protectionism
1) Protection of infant industry
2) National defense
3) Industrialization of a low wage nation
True/false: Protectionism is bad for consumers but good for business/industries.
True
Lists the 12 trade barriers
1) Tariffs
2) Quota
3) Import license
4) Voluntary export restraints (VER)
5) Boycott
6) Embargo
7) Blocked currency
8) Government Approval
9) Standards
10) Antidumping penalties
11) Dumping
12) Domestic subsidies and economic stimuli
