International trade Flashcards
Imports
goods or services bought from overseas
Diversify
Where a business enters a completely new market where it does not operate
What prevents a country from producing certain goods domestically?
They do not have the natural resources that enable such production.
What are two reasons for other countries being able to produce goods more cheaply and efficiently?
They have cheaper resources
They have become experts of producing through specialization
Define reserves-
Amount of something valuable such as oil, gas or metal ore
What are the three things a country can do with the foreign currency they make off of international trade and explain-
- It can be used to invest in domestic industries and infrastructure which will lead to economic growth and development.
- It can be used to pay of loans or debts to other countries or international organizations which can help improve the countries credit worthiness and financial stability.
-The foreign income gained can be used to purchase other good and services from overseas which will provide the domestic customers with an wide variety and availability of goods.
Elaborate on selling off unwanted commodities
In this they trying to give the idea that a nation may produce a large output of a certain commodity and it can never fully be used by the domestic consumers so they can instead sell it to other countries.
Define exports
goods and services which are sold overseas
As an economy develops, a greater proportion of its income is generated off of the provision of services. Give three reasons as to why this is and elaborate on them.
As an economy develops, the population tends to become wealthier and more educated, leading to higher demand for services such as healthcare, education, and finance.
Additionally, the development of technology and automation in manufacturing and agriculture reduces the need for labor in these sectors, causing a shift towards service-oriented jobs.
Lastly, services tend to have higher profit margins than goods, making them more attractive to businesses and investors looking for higher returns on their investments.
define the flows of money
Movement of money between countries resulting from transactions
define the flows of money
Movement of money between countries resulting from transactions
Define primary income
The flows of money, such as rents, profits and interesting resulting from the ownership of assets overseas.
Secondary income
The flows of money between a government and other organizations
What does secondary and primary income have in common?
Flows of money do not result from the exchange of goods and services.
Define balance of payment
A record of all transactions relating to international trade.
Visible balance
The difference between the value of the visible exports and the value of the visible imports.
Current account
Part of the balance of payments where all imports and exports are recorded
What’s another name for visible balance
Balance of trade
Capital and financial account
The part of the balance of payments that record transactions relating to savings and investments
Current balance
Difference between a nations exports and imports of goods and services.
A current account deficit
Where the value of imports exceed the value of exports on the current account. CB is negative.
Define current account surplus
Where the value of exports exceed the value of imports on the current account. CB is positive.
Describe what will happen to the capital and financial account and current account of the home country and the foreign country when a domestic citizen chooses to invest 50,000% in a company based in that foreign country.
Check yourself
Describe what will happen to the capital and financial account and current account of the home country and the foreign country when a domestic citizen chooses to invest 50,000% in a company based in that foreign country.
Check yourself
