topic 7.6 trade and world economy Flashcards
Self-sufficiency
producing all necessary goods and services for your country domestically.
International trade:
focusing on a few key industries and trading for the rest
Why is this the preferred path?
You don’t have to do it all, especially if you can’t. You can find what you are good at comparatively and trade for the rest
Deindustrialization:
the decrease in industrial (secondary sector) jobs
Positives:
means your country is economically maturing and increasing the number tertiary and beyond jobs
Negatives
they are still jobs, and people will lose them when these businesses close and go elsewhere
Complementarity
the mutually beneficial trade relationship between two countries that results when they have different comparative advantages
Comparative advantage
the relative cost advantages of producing certain goods and services for trade, basically: I may not be the best at producing this, but in comparison to what I could do, when do I have an advantage on
Neoliberal policies:
the belief that open markets and free trade around the world will lead to economic development everywhere, FREE TRADE POLICIES
Free trade agreements
an agreement to keep trade barriers, tariffs (taxes) low between trade partners
Trading bloc:
groups of countries that agree to common trade policies
European Union (EU):
economic alliance between member European countries. Goal is to promote economic development. Keeps trade barriers low, has a common currency, and common passport for ease of travel
World Trade Organization:
organization that helps countries negotiate trade agreement, settle disputes, and oversee trade rules
Mercosur
free trade agreement between member countries in South America
Organization of Petroleum Exporting Countries (OPEC):
organization that controls vast petroleum supplies. Majority of countries are in the Middle East. Depending on relations with the Middle East, the supply of oil may be manipulated. For example: the 1970s OPEC cut off oil to the U.S. and mass hysteria ensued
United States-Mexico-Canada Agreement (USMCA):
based on the original NAFTA (North American Free Trade Agreement), keeps trade barriers between Canada, US, and Mexico low and encourages economic development in North America. Has allowed for multinational corporations to operate factories (maquiladoras) in Mexico.
Tariffs
taxes on trade goods
Explain the global financial crisis of 2007-2009.
Due to the housing market crash (too many people granted home loans and could not pay them back), banks struggled to provide loans to corporations making it difficult for them to have normal operations, and caused many of them to lay off workers. Which made it hard for them to pay their mortgage. It continues to spiral. Due to a global economy, other countries are also impacted.
What is the purpose of the International Monetary Fund?
To insure the stability of the international monetary system that allows countries to conduct business with each other
