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Macro Economics A2 > International Trade > Flashcards

International Trade Flashcards

1
Q

Absolute advantage

A

Occurs when a country can produce a product using fewer fop than another.

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2
Q

Comparative advantage

A

A country should specialise in the g/s it can produce at the lowest oppo cost and trade with another
Enables to produce beyond PPF
Mutual benefit

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3
Q

Index of term of trade

A

Index of export p/ index of import p

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4
Q

Trading bloc

A

A grp of countries that have signed an agreement to reduce or eliminate tariffs, quotas and other protectionist barriers bet themselves

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5
Q

Trade creation

A

Welfare gain of joining of customs union
Low tariff

The switch from purchasing products from a high-cost producer to a lower-cost producer

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6
Q

Trade diversion

A

Welfare loss of joining customs union

Common ext tariff

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7
Q

Optimum currency A

A

A grp of countries where efficiency would be maximized by sharing a common currency

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8
Q

Preferential trading A

A

Lower barrier

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9
Q

FTA

A

Free trade, own tariff against non-member

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10
Q

Customs union

A

Common external tariff

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11
Q

Common mkt

A

Free movement of fop

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12
Q

Eco union

A

Harmonization of eco policy

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13
Q

Protectionism

A

When a country take actions to protect its own industries by restricting trade with other countries
Key word: trade restriction

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14
Q

Dumping

A

Sales of goods at less than cost price by foreign producers in domestic market

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15
Q

Quota

A

Physical limit on the quantity of an imported grp

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16
Q

expenditure reducing (reduce ça deficit

A

D level of consumption and AD

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17
Q

Expenditure switching (reduce ça deficit

A

Switch D away for imports towards domestic g/a

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18
Q

Globalization

A

Growing integration and interdependence of the world eco

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19
Q

Infant industry

A

Rationale for protecting domestic firms fr foreign competition until they have grown large enough to achieve Eos to match rival firms

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20
Q

Hot money

A

Money in search of highest sr rate of return available internationally

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21
Q

Floating er

A

Determined solely by the forces of D/S

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22
Q

Fixed er

A

Fix er to the p of another country

23
Q

Managed er

A

Primarily determined by D/S but the gov may intervene on occasion to influence the er

24
Q

Revaluation

A

Fixed: upwards adjustment

25
Q

Devaluation

A

Fixed: downwards adjustment

26
Q

Appreciation

A

Floating er I

27
Q

Depreciation

A

Floating er d

28
Q

Transactions D(er

A

D for currency derives from ppl wishing to buy g/s from that country

29
Q

Speculative D(er

A

Higher ir attracts speculators to U.K. Banks in order to achieve a higher return

30
Q

Marshall-Lerner condition

A

Devaluation/depreciation of the er will only improve a CA deficit/increase in net X if the sum of the PEDs for X and M is greater than 1
PEDx+PEDy>1

31
Q

J curve

A

Depreciation leads to SR d in CA and and LR i in CA

32
Q

Poverty/earning trap

A

An indi is little better off or worse off when gaining an i in wages bc of the combined effect of increased tax and bene withdrawal

33
Q

Labour mkt flexibility

A

The degree to which d/s in a labour mkt respond to external changes to return the mkt to equil

34
Q

Interventionist pol

A

Correct mkt failure

35
Q

Mkt-based pol

A

Reduce barriers to the free mkt

36
Q

FDI

A

Spending by firms on productive capacity in other country

Purchase of foreign company/setting up of plants

37
Q

FDI Outflow

A

Debit on financial a

But may lead to inflow on CA

38
Q

What makes up the bop?

A

Financial a
Cap à
Current a

39
Q

What makes up financial a?

A

FDI
Hot money
Portfolio I
Gov i

40
Q

Eva of FDI

A

Repatriation of profits (investment income)

41
Q

Eva of ça

A

Primary product dependency

42
Q

Productivity

A

Output per worker per hour worked

43
Q

competitiveness

List factors that determine non-p and p compe

A

A country’s ad/disadvantage in selling exports in international markets

ULC: prod, NMW, flexibility( labour laws, TUs
Px:infrastructure, corp tax, inf
Quality

44
Q

ULC

A

Total wage/ unit output

45
Q

E.g. Of expenditure switching

A

Protectionism and devaluation

46
Q

E.g. Of expenditure reducing

A

Contractionary

47
Q

J curve

A

SR fall in BOP following a devaluation Before LR elastic PED for M and X leads to rise

48
Q

crowding out

A

Public sector spending reduce private sector i

49
Q

Real er

A

The p of a country’s goods relative to abroad when expressed in a common currency

50
Q

AN Containérisation

A

Easily transferred bet diff modes of transport
Reduce cost: less labour=>higher labour productivity
Container principle

51
Q

WTO and its aims

A

Supervise and libéralisé international trade

Libéralisation, rules, dispute settlement

52
Q

Factors that encourages FDI

A 
Infrastructure
Labourforce skill
X tariff
X mkt
Exchange control
53
Q

Ad of fixed er

A

P stability

54
Q

WTO roles

A

Anti dumping

Anti protectionism

Macro Economics A2 (6 decks)

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