Chapter 3 Flashcards
Opportunity Cost
The opportunity of giving up the second-best choice when making a decision.
Absolute Advantage
The benefit a country has in a given industry when it can produce more of a product than other nations using the same amount or resources.
Comparative Advantage
The benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries.
Balance of Trade
A basic measure of the difference in value between a nation’s exports and imports including both goods and services.
Trade Surplus
Overage that occurs when the total value of nation’s exports is higher than the total value of its imports.
Trade Deficit
Shortfall that occurs when the total value of a nation’s imports is higher than the total value of its exports.
Exchange Rate
A measurement of the value of one nation’s currency relative to the currency of other nations.
Countertrade
International trade that involves the barter of products for products rather than for currency.
Foreign Outsourcing
(also contract manufacturing) Contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production.
Importing
Buying products domestically that have been produced or grown in foreign nations.
Exporting
Selling products in foreign nations that have been produced or grown domestically.
Sociocultural Differences
Differences among cultures in languages, attitudes and values.
Infrastructure
A county’s physical facilities that support economic activity.
Protectionism
National policies designed to restrict international trade, usually with the goal of protecting domestic businesses.
Tariffs
Taxes levied against imports
Quotas
Limitations on the amount of specific products that may be imported from certain countries during a given time period.
Embargo
A complete ban on international trade of a certain item, or a total halt in trade with a particular nation.
Free Trade
The unrestricted movement of goods and services across international borders.
General Agreement on Tariffs and Trade (GATT)
An international trade treaty designed to encourage worldwide trade among its members.
World Trade Organization (WTO)
A permanent global institution to promote international trade and to settle international trade disputes.
North American Free Trade Agreement (NAFTA)
The treaty among the United States, Mexico and Canada that eliminated trade barriers and investment restrictions over a 15-year period starting in 1994.
European Union (EU)
The world’s largest common market, composed of 28 European nations.
