Chapter 3 Global competition Flashcards
Why do nations trade, and how is it measured?
Countries trade when they each have a surplus of the goods they specialize in and want a product the other country specializes in.
What a country specializes in may be the result of Absolute/ relative/ competitive/ relative advantage
How do we measure international trades?
Balance of trades: export-import
balance payments: inflow-outflow
What is a trade deficit?
When imports exceed exports
What are barriers to international trades?
Any regulation/condition that keeps businesses from selling to one another in foreign markets.
Why do we have barriers to international trade?
Political or economic pressures to not trust a foreign nation.
Types of barriers to international trade and examples of each
natural- language/distance
tariff- tax on imported goods
non-tariff- foreign exchange control, import quotas.
Reasons for trade restrictions
To equalize a nation’s balance of payments
To protect new or weak industries
To protect domestic jobs
To protect national security
To protect the health of citizens
To retaliate for another country’s trade restrictions
Reasons against trade restrictions
Higher prices for consumers
Restriction of consumers’ choices
Loss of jobs
Misallocation of international resources
To retaliate for another country’s trade restrictions
How do governments and institutions foster world trade
Through the international trade agreement.
Which organizations are working to foster trade?
World bank
International monetary fund
What are international economic communities?
