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Economics SL (Year 2) - IB > Unit 3A: International Economics > Flashcards

Unit 3A: International Economics Flashcards

1
Q

Tariff

A
  • Tax put on goods imported from abroad
  • Raises price of imported product
  • Helps domestic producers of similar products sell them at higher prices
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2
Q

Quota

A
  • Limit on the amount of a good that can be imported.
  • Creates shortage, causing price of good to rise
  • Allows domestic producers to raise prices and expand production
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3
Q

Embargo

A

Stops exports or imports of a product/group of products to or from another country

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4
Q

Licensing requirements: General info

A
  • Requirements to import or export a good/group of goods
  • Imports can be restricted by issuing few or no licenses
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5
Q

Licensing Requirements: Exports

A

Export licenses can be used to restrict trade with other countries or keep prices of domestic goods from rising

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6
Q

Subsidies

A
  • Money given by governments to encourage exports
  • Allows firms to charge less for their goods than foreign producers (thereby encouraging exports)
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7
Q

Protectionism: Excessive foreign spending

A

Causes reduced domestic GDP and higher unemployment due to high payments for imports and reduced domestic industry from foreign spending

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8
Q

Protectionism: Trade deficits

A
  • Difference between revenue earned from exports and money paid for imports
  • Causes need to borrow loans to pay for imports
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9
Q

Protectionism: Artificially low-price exports

A

Artificially low-price exports from “dumping”, that can harm consumers

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10
Q

Protectionism: Unequal trade terms and agreements

A

Unequal trade terms and agreements between countries (ex: amount of good country needs to export to receive x amount of imports)

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11
Q

Protectionism: Protecting developing industries

A

Protecting developing industries, especially in poorer countries, until they can compete without government help.

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12
Q

Protectionism: Strategic Industries

A
  • Governments protect industries with high wages and high tech from foreign competition.
  • They also protect domestic agriculture.
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13
Q

N. E. Protectionism: Limits in World Trade

A

Reduction in total number of goods and services produced

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14
Q

N. E. Protectionism: Workers earning reduced income

A

Workers from foreign countries earn reduced income due to less foreign revenue from protectionism

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15
Q

N. E. Protectionism: Shrinking Global Market

A
  • Protectionism results in reduction of the global market for a good
  • Results in reduced global economic growth and development
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16
Q

N. E. Protectionism: Retaliatory Tactics

A

Limits imposed by one country to a foreign country result in retaliatory trade limits from the foreign country

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17
Q

N. E. Protectionism: Reduced Exports

A

Foreigners may reduce imports from reduced export revenues, harming exporting industries and workers

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18
Q

N. E. Protectionism: Reduced Efficiency

A

With reduced competition from foreign producers, domestic producers may use less efficient production methods

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19
Q

Foreign Exchange Market

A

A global decentralized market where currencies are traded.

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20
Q

Locations of major currency markets

A

London, NYC, Tokyo, Hong Kong, Singapore

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21
Q

Economic agents involved in transaction of foreign exchange

A
  • Central banks
  • Commercial banks
  • Governments
  • Other institutional investors
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22
Q

Flexible (Floating) Exchange Rate System

A

Country allows its currency value to be determined by supply and demand in the foreign exchange market

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23
Q

Currency Appreciation

A

An increase in the value of currency

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24
Q

Currency Depreciation

A

A decrease in the value of the currency

25
Q

Fixed (Pegged) Exchange Rate System

A

Country decides to fix the value of its currency in relation to some other nation’s currency

26
Q

Currency Revaluation (Fixed ERS)

A

Country decides to raise the value of its currency

27
Q

Currency Devaluation (Fixed ERS)

A

Country decides to reduce the value of its currency

28
Q

Managed Flexible Exchange Rate (Dirty Float)

A

Country allows its currency to float within a specific range

29
Q

Formula for converting one currency to another

A
  • 1/Exchange rate
  • Ex: $1.00 USD = $1.41 CAD
  • $1.00 CAD = $0.709 USD
30
Q

Trade Flows

A

↑D(CDN Exports) → ↑D($CDN)

31
Q

Income of Importing Country

A

↑Y(US) → ↑D(CDN Exports) → ↑D($CDN)

32
Q

Capital Flows

A

↑D(CDN Securities (financial deposits)) → ↑D($CDN)

33
Q

Interest Rate Differentials

A

↑i-rate(CDN i-rate vs. US) → ↑D(CDN Securities (financial deposits)) → ↑D($CDN)

34
Q

Canadian Goods

A

↓D(CDN Goods) → ↓D($CDN)

35
Q

Domestic inflation rate

A

↑In(CDN vs. US) → ↓D(CDN Goods) → ↓D($CDN)

36
Q

Currency Speculation: Higher Value

A
  • ↑E($CDN) → ↑D($CDN​ )
  • Investors will demand more $CDN
37
Q

Currency Speculation: Lower Value

A
  • ↓E($CDN) → ↑S($CDN​)
  • Investors will sell $CDN, increasing the supply of $CDN in the market
38
Q

Central bank use of foreign currency reserves

A

Country’s reserves of gold and foreign currencies ($USD) are used to stabilize their domestic currency

39
Q

Level. Integration 1

A

Preferential Trade Area

40
Q

Level. Integration 2

A

Free Trade Area

41
Q

Level. Integration 3

A

Customs Union

42
Q

Level. Integration 4

A

Common Market

43
Q

Level. Integration 5

A

Monetary Union

44
Q

Level. Integration 6

A

Fiscal Union

45
Q

Level. Integration 7

A

Political Union

46
Q

Elimination of Tariffs and Quotas among members?

A

All: Yes

47
Q

Common Tariffs and Quota System

A
  • All except Free Trade system: Yes
  • Free Trade system: No
48
Q

Elimination of restrictions on factor movements

A
  • Free Trade and Customs Union: No
  • Common Market and Above: Yes
49
Q

Harmonization/ Unification of Economic and Social Policies and Institutions

A
  • All except Economic/Political Union: No
  • Economic/Political Union: Yes
50
Q

Trade Diversion

A

Trade switches from more efficient producer outside trade grouping to less efficient producer inside trade grouping (who enjoys preferential access)

51
Q

Free Trade Agreement

A

Countries agree (with some exceptions) to allow unhindered movement of goods and services between each other.

52
Q

Customs Union (Info)

A

Free trade area combined with agreement that members have identical tariffs for non-member states.

53
Q

Customs Union (reason for identical tariffs)

A

No member can (through charging lower tariffs than other members) route disproportionate share of a group’s trade through itself

54
Q

Common Market

A

Customs union combined with agreement providing free movement of factors of production between member states

55
Q

Monetary Union

A

Common market combined with the adoption of a common currency and common monetary policy

56
Q

Global Trade Diagram (Supply)

A
  • Unitary Elastic Supply: S(Domestic Producers)
  • Perfectly Elastic Supply: S(ROW)
57
Q

Global Trade Diagram (P & Q)

A
  • Two different quantities (where S(ROW) meets domestic supply and demand)
  • Higher Domestic Price, Lower Global Price
58
Q

Global Trade Diagram (Imports)

A

Imports are represented as gap between leftmost and rightmost quantity

59
Q

Quota Diagram

A
  • Domestic Supply increases
  • Price of domestic suppliers decreases, allowing more production

Economics SL (Year 2) - IB (3 decks)

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