Economics: International Trade Flashcards
Absolute Advantage
A countries ability to produce a good or service at a lower cost than its trading partner
Autarkic price
The price of a good or service in an autarkic economy (closed)
Autarky
A state in which a country does not trade with other countries
Balance of Payments
A double-entry bookkeeping system that summarizes a countries economic transactions with the rest of for a particular time period
Capital Account
A component of the balance of payments account that measures transfers of capital
Capital Restrictions
Controls put on foreigners to own domestic assets or or domestic residents to own foreign assets
Closed Economy
An economy that does not trade with other economies, an autarkic economy
Common market
Level of economic integration that incorporates all aspects of the customs unions and extends by allowing free movement of factors of production among members
Comparative Advantage
A countries ability to produce a good or service at a lower relative cost, or opportunity cost than its trading partner
Current Account
A component of the balance of payments account that measures the flows of goods and services
Customs Union
Extends the free trade area (FTA) by not allowing free movement of goods and services among members, but also creating a common trade of policy against nonmembers.
Domestic content provisions
Stipulate that some percentage of the value added or components used in production should be of domestic origin
Economic Union
Incorporates all aspects of a common market and in addition requires common economic institutions and coordination of economic policies among members
Export Subsidy
Paid by the government to the firm when it exports a unit of a good that is being subsidized
Exports
Goods and services that an economy sells to other countries
Financial Account
A component of the balance of payments account that records investment flows
Foreign Direct Investment
Direct investment by a firm in one country (source county) in productive assets in a foreign country (host country)
Foreign portfolio account
Shorter-term investments by individuals and institutional investors (eg pension funds) in foreign financial instruments such as foreign stocks and foreign government bonds
Free trade
When there are no government restrictions on a countries ability to trade
Free Trade Areas
One of the most prevalent forms of regional integration, in which all barriers to the flow goods and services among members have been eliminated
Import License
Specifies the quantity of a good that can be imported into a country
Imports
Goods and services that a domestic economy (house holds, firms and government) purchases from other countries.
Monetary Union
An economic union in which successive he members adopt a common currency
Multinational corporation
A company operating in more than on country or having subsidiary firms in more than one country
Net Exports
The difference went the value of a countries exports and the value of its imports (X-M)
Open Economy
An economy that trades with other countries
Quota Rents
Profits that foreign producers can earn by raising the price of their goods higher than they would without a quota
Quotas
Government policies that restrict the quantity of a good that can be imported into a country
Small Country
Price takers in the world market who cannot influence the world market price
Tariffs
Taxes that a government levies on imported goods
Terms of trade
Ratio of price of exports to the price of imports, representing those prices by export and import price indexes
Trade Creation
When regional integration results in the replacement of higher domestic production by lower cost imports from other members
Trade dispersion
When regional integration results in the replacement of lower cost domestic production by higher cost imports from other members
Trade protection
Government policies that impose restrictions in trade, such as tariffs and quotas
Trade surplus (deficit)
When the value of exports is greater (less) than the value of imports
Voluntary export restraint
A trade barrier which the exporting country agrees to limits its exports of the good to its trading partners to a specified number of units
World price
The price prevailing in the world market
