Midterm

Question 1

distributional consequences

Answer 1

they influence how income is distributed between groups within countries & between nations in the international system.

Question 2

Marxism

Answer 2

According to Marx, capitalism is characterized by two central conditions: the private ownership of means of production (or capital) and wage labor. Marx argued that the value of manufactured goods was determined by the amount of labor used to produce them.

Question 3

comparative advantage

Answer 3

compares two different countries in terms of two different products; a country has comparative advantage in a product when its opportunity cost for producing that product is lower than another country’s.

Question 4

Smoot-Hawley Act

Answer 4

Trade legislation passed by U.S Congress in 1930 that raised the average American tariff to almost 60%. Regarded to have contributed to the collapse of the word trade and monetary systems & deepened the global depression.

Question 5

Tariff

Answer 5

taxes that governments impose on foreign goods coming into the country and raises the price of the foreign goods in the domestic market of the country imposing the tariff

Question 6

Nontariff Barrier (NTB)

Answer 6

any of the number of policy or structural impediments to trade other than tariffs.

Question 7

collective active problem

Answer 7

the action of a number of individuals is required to achieve a common goal. the problem arises when people do not invest time, energy, or money to achieve a common goal.

Question 8

General Agreement on Tariffs and Trade (GATT)

Answer 8

in 1947, an international agreement that established rules that regulate national trade policies.

Question 9

World Trade Organization (WTO)

Answer 9

the principle international trade organization, an organization whose role includes administering trade agreements, providing a forum for trade negotiations, helping governments settle trade disputes, and reviewing national trade policies.

Question 10

market liberalism

Answer 10

a core principle of WTO that asserts an open or liberal international trade system raises the world’s standard of living. every country gains from liberal trade.

Question 11

non-discrimination

Answer 11

a core principle of WTO that ensures that each WTO member faces identical opportunities in trade with other WTO members.

Question 12

Most Favored Nation (MFN)

Answer 12

central principle upon which the WTO is based, this rule requires that any advantage extended by one WTO member government to another also be extended to all other WTO members.

Question 13

national treatment

Answer 13

requires governments to impose identical tax and regulatory policies on foreign and domestic like products.

Question 14

domestic safeguards

Answer 14

allow governments to temporarily suspend tariff reductions they have made previously when a domestic industry is being threatened by a sudden surge of imports.

Question 15

Generalized System of Preferences (GSP)

Answer 15

advanced industrialized countries can allow manufactured exports from developing countries to enter their markets at a preferential tariff rate.

Question 16

ministerial conference

Answer 16

highest level of WTO decision making, they draw top-level officials together for a 3 or 4 day session at least once every 2 years. They used to establish an agenda for forthcoming negotiations or bridge remaining differences in ongoing negotiations.

Question 17

Dispute Settlement Mechanism

Answer 17

a quasi-judicial tribunal that is used to resolve trade disputes between WTO member governments.

Question 18

Regional Trading Agreements (RTA)

Answer 18

trade agreements in which tariffs discriminate between members and nonmembers.

Question 19

custom union

Answer 19

a form of regional trading arrangement in which member governments eliminate all tariffs on trade between members of the union and create a common tariff that is imposed on goods entering any member country of the union from countries outside the union.

Question 20

Free Trade Area

Answer 20

trading arrangement in which governments eliminate all tariffs on goods imported from other members, but retain independent tariffs on goods imported from non-members.

Question 21

factor endowments

Answer 21

the amount of land, labor, and capital a country has available, countries have different relative factor endowments.

Question 22

Nash Equilibrium

Answer 22

an outcome in a game theoretic model in which none of the players has an incentive to change their strategy unilaterally.

Question 23

tit for tat

Answer 23

a strategy often associated with iterated play of the prisoners dilemma in which each actor plays the strategy its partner played in the prior round of play.

Question 24

reciprocity

Answer 24

the concessions that each governments makes to its partners in multilateral trade negotiations are roughly the same size as the concessions it gains from its trading partners.

Question 25

factors

Answer 25

the basic tools of production including labor, land, and capital.

Question 26

specific factors

Answer 26

a factor of production that is tied to a particular industry or sector & that cannot be easily or quickly moved to another sector.

Question 27

factor mobility

Answer 27

the ease with which factors of production can move from one industry to another.

Question 28

Economics of Experience

Answer 28

the cost of producing a good fall as workers and managers gain the specific skills as a consequences of producing the good.

Question 29

Economies of Sale

Answer 29

reductions in the unit cost of producing a good caused by increases in the number of goods produced.

Question 30

industrial policy

Answer 30

an assortment of government policies, including tax policy, government subsides, traditional protectionism, and government procurement practices, used to channel resources away from some actors and industries and direct them toward those actors and industries the government wishes to promote.

Question 31

oligopoly

Answer 31

a market dominated by a few producers, each firm has some influence over the price of the good it makes, whereas in perfectly competitive markets each producer is a price taker.

Question 32

state strength

Answer 32

the degree to which policymakers are insulated from interest group pressures when making policy decisions.

Question 33

U.S Trade Representative (USTR)

Answer 33

this office sets and administers U.S trade policy, the nation’s chief & represents the U.S in the WTO and other international trade organizations.

Question 34

Foreign Direct Investment (FDI)

Answer 34

a form of cross border investment in which a resident or corporation based in one country owns a productive asset located in a second country.

Question 35

Multinational Corporation (MNC)

Answer 35

a company that has ownership & manages production facilities in two or more countries.

Question 36

horizontal integration

Answer 36

a form of industrial organization that occurs when a corporation creates multiple production facilities, each of which produces the same good or goods.

Question 37

vertical integration

Answer 37

a form of industrial organization in which a single firm controls the different stages of the production process, rather than relying on the market to acquire inputs & sell outputs.

Question 38

locational advantages

Answer 38

country characteristics, such as its factor or natural resource endowments or market size, that create incentives for a foreign corporation to invest in the country.

Question 39

market oriented investment

Answer 39

a foreign firm in the local economy made in order to gain access to consumers (the market) within the host country.

Question 40

natural resource investment

Answer 40

a foreign firm in a local economy made in order to gain access to the local economy’s natural resources.

Question 41

efficiency oriented investment

Answer 41

a foreign firm in the local economy made in order to use the locally abundant factor in production oriented toward the global market.

Question 42

performance requirement

Answer 42

a target imposed on the local affiliate of an MNC by the host country government in order to promote a specific economic objective

Question 43

locational incentives

Answer 43

offered by governments to MNC, designed to reduce the cost of, and thereby increase the return from, a particular investment. governments offer this to induce them to invest in their country rather than another.

Question 44

export processing zones

Answer 44

industrial estates where the government provides land, utilities, transportation infrastructure, and buildings to the investing firms, at usually subsidized rates.

Question 45

UN Resolution on Permanent Sovereignty over Natural Resources

Answer 45

this document recognizes the right of host countries to exercise their full control over their natural resources & over foreign firms operating within their borders extracting those resources.

Question 46

market

Answer 46

a variety of systems, institutions, and procedures where parties engage in an exchange; clothing & grocery stores, labor market, capital market, etc.

Question 47

demand curve

Answer 47

a graph showing the demand for a product with changes in its price, as price goes up, demand goes down. as demand goes up, prices go down.

Question 48

current account

Answer 48

records all payments between the country and the rest of the world in connection with goods, services, income earned of foreign investments, etc.

Question 49

3 Is

Answer 49

Interests: who are the relevant actors?, Interactions: actors choice of actions & strategies are independent, Institutions: rules of the game that shapes actors interactions

Question 50

Prisoners Dilemma

Answer 50

a game-theoretic model often used to depict the difficulties that governments face when trying to cooperate in the global economy.