Chapter 5 Flashcards
Mercantilist practices were seen as essential to state power because
The accumulation of precious metals could be converted into military assets when needed
The mercantilist approach to trade is similar to what theoretical framework?
Realism
Balance of trade
Value of imports relative to exports
Comparative advantage
States differ in their abilities to produce different goods due to different resources and technology.
Monopoly
One supplier of an item
Oligopoly
A monopoly shared by just a few large sellers
Autarky
To avoid trading and try to produce all goods by itself. Also called self reliance
Protectionism hurts an economy in what way?
Consumers pay higher prices
Dumping
The sale of products in foreign markets at prices below the minimum level necessary to make a profit
Tariff
Tax imposed on certain types of goods
Quota
How many goods of a certain kind can be imported
Imposed to restrict growth of those products
Subsidies
Payments to a domestic industry that allow it to lower it’s prices without losing money
The world trade organization replaced what in 1995?
GATT
Most-favored-nation principle
Concept which says that trade restrictions imposed by a WTO member on its most favored trading partner must be applied equally to all WTO members
Largest, most comprehensive, regional free trade area is in
Europe
Cartels
An association of producers or consumers, or both, of a certain product formed to manipulate its price on the world market
Most prominent cartel in the international economy
OPEC
Most profitable goods involved in illicit trade
Drugs and weapons
The industrial revolution began in
Great Britain in the 18th century
Groups that oppose free trade because of its negative impacts include
Labor unions
The global currency that had value in all countries was
The US dollar
Fixed exchange rates
Official rates of exchange for currencies set by governments
Floating exchange rates
Rates determined by global currency markets in which private investors and governments alike buy and sell currencies
How do governments increase the value of currency?
Intervene in currency markets and buy a currency, increasing its value
How do governments decrease the value of currency?
Intervene in currency markets and sell a currency, decreasing the value
The principle determinant of the long term value of a states currency is
Changes in the long term supply and demand for the currency
Central banks in industrialized countries maintain the value of the states currency by
Limiting the amount of money printed and preventing high inflation
Bretton woods system
1944 to manage international monetary relations
When did the International Monetary Fund begin?
After the gold standard was abandoned
When did the World Bank begin?
After WWII
Why do states go into debt?
Trade defecits
Monetary policy
Decisions about printing and circulating money
Fiscal policy
Government decisions on spending and taxation
Direct foreign investment
Includes tangible goods such as factories and office buildings
