Global Definitions Flashcards
international trade
exchange of g/s btwn countries
free trade
international trade (exchange of g/s btwn countries) with no trade barrier
protectionism
gov intervention to limit imports and protect domestic producer by setting up trade barriers
infant industry
newly opened industried not yet large enough to take advantage of EOS
dumping
exporting goods to foreign countries at a price below COP
floating exchange rate
ER is determined by the D&S of the currency in the foreign exchange market
appreciation
when the value of a currency increases in terms of a other currency;
in a floating exchange rate system!!
undervalued currency
a currency whose ER is lower than its equilibrium ER; achieved through intervention in a fixed ER system
economic integration
economic interdependence between countries involving trade agreements to lower or eliminate trade barriers
balance of payments
a record of the value of all transactions of a country with the world over a period of time
absolute advantage
when a country is the most efficient at producing a g/s compared to other countries
comparative advantage
when a country has a lower opportunity cost to produce a g/s compared to other countries
current account
a subaccount of BOP; records the value of net exports of g/s + net income + net current transfers of a country over a period of time
current account deficit
credits < debits
specialization
when a firm/country focuses on the production of g/s that they have comparative advantage
economies of scale (EOS)
increase output → lower AC
trade deficit
M expenditure > X revenue
exchange rate
the value of one currency expressed in term of another currency
fixed exchange rate
the exchange rate is controlled by the government/central bank
revaluation
an increase in the value of a currency in a fixed exchange rate system
purchasing power parity (PPP)
makes the PP of different currencies equal to the PP of $1
trading bloc
a group of countries that have agreed to reduce protectionist measures between them
credit vs debit
Credit: transactions within the BOP that lead to an inflow of currency; + sign in CA
Debit: transactions within the BOP that lead to an outflow of currency; - sign in CA
world trade organization (WTO)
an international body that sets the rules for trade, facilitates trade agreements, and settles trade disputes
