International Trade Flashcards
What is international trade
The movement of goods services and investments across international borders
advantages of international trade
Obtain goods and services that they can’t produce at all or in sufficient quantity
Obtain good and services at a lower prices form overseas
Trade leads to international specialization where allows for output increase and real GDP
What is international specialization
Different countries have different resources (land capital about entrepreneurship) each country is more suitable to particular types of production.
Definition of Absolute advantages
Absolute advantages means a country’s ability to produce particular goods more efficiently (using fewer resources and at a lower cost) Ghana some other countries
What ability of a country can be called as absolute advantages
More of that good with the same resources
The same quantity of that goods using fewer resources
That goods with a lower production cost
The definitions of competitive advantages
Means a country ‘s ability to produce goods at a lower cost than any other countries
The formula of opportunity cost
Loss/gain
The definition of The term of trade (TOT)
The quantity of goods which must be given up by one country to gain a given quantity of a product from another country.
The formula of the term of trade
(export price index/import price index) *100
Two situations of TOT
- TOT improvement
Export price increase or import price decrease - TOT deterioration
Export price decrease or import price increase
The definition of free trade
No artificial barriers imposed by the government upon the flow of goods and services across international borders
The organization of the free trade
EU
European Union
NAFTA
North American free trade agreement
ASEAN
Association of southeastern Asia nations
Advantages of free trade
More efficient allocation of resources
Increase global output
Higher national income, living standards
International specialization-best practice
Economic of scale in workers markets
Competition between local and foreign producers
Promotion of good relations between countries
The definition of protectionism
The use of artificial barriers (quotas and tariffs) which restrict the free flow of goods and services in international trade
What does government assistance aim at?
Government assistance aimed at giving local producers advantages over foreign competing industries
What is trade barriers
Trade barriers are government polices or regulations that restrict international trade
Main methods of trade protectionism
Tariffs
Quota
Embargo
Subsidies
The definition of tariffs
A tariff is a tax on the imports
the winner of tariffs
Domestic firms’ sales and price increase
Workers in domestic firm gain security and possible wages
Government gains revenue
Resources suppliers gain sales-allocation effect
losers
consumers pay more for g&s Consumption quantity falls Other industries-direct and indirect dost may increase Lead to inflation Importers sell less
what is quota
Legal limit on the quantity of a particular good which can be imported. Restrict quantity supplies that can be imported
The similarities of effects of tariffs and quota
Domestic price rises
Domestic production rises
Domestic purchases fall
Imports fall
The difference of effects of tariffs and quota
Quota:no revenue of government
Tariffs: revenue of government
The definition of Subsidies
Cash payments by government to domestic
The effect of subsidies
Expense to government ( and taxpayers)
Consumers pay less
Works in the external economy as well can help export
The effect of tariffs
Government gains revenue
Consumers pay more adds to inflation
Only effect in domestic market
Only blocks import
The definition of embargo
Total ban on products from a particular country
Infant industry
Is one that is in early stage of development and which Conor survive competitor from foreign companies
strategic industry
Is one that is particularly important to a country ‘a economy
Generic
A cheaper copy of a product that is not marked with the producer’s name
Trademark
A name or symbol sharing that a product is made by a particular producer and which cannot be legally used by anyone else
Dumping
Selling unwanted goods very cheaply , usually in other countries
Copyright
The legal right to control the production and selling of a book play film photograph piece of music , etc
Subsidize
To play part of the cost of agh
What should a country produce described in competitive advantages
A country should produce (specialize in) that good in which it has the lower opportunity cost
Most efficient use of resources
