Unit 4 - International Trade

Question 1

International trade

Answer 1

Trade that involves the export and imports of goods or services between countries

Question 2

Free trade

Answer 2

International trade that is not subject to any kind of trade barriers, such as tariffs or quotas

Question 3

benefits to intl trade? (7)

Answer 3

increased competition, lower prices, greater choice, acquisition of resources, more foreign exchange earnings, access to larger markets, economies of scale, more efficient resource allocation, more efficient production

Question 4

benefits of free trade to consumers (2)

Answer 4

lower prices, greater choice

Question 5

benefits of free trade to producers

Answer 5

domestic firms access larger markets and enjoy EOS

Question 6

benefits to economy + resource allocation (4)

Answer 6

1. countries can acquire resources they don’t have (acquire needed sources)
2. trade specialization (more efficient resource allocation)
3. domestic firms face increased competition -> higher efficiency, lower cop
4. countries can earn foreign exchange from export revenue (source of foreign exchange)

Question 7

Trade protection

Answer 7

Government intervention aiming to limit imports and/or encourage exports by setting up trade barriers that protect from foreign competition

Question 8

Tariffs

Answer 8

A tax that is placed on imports to protect domestic industries from foreign competition and to raise revenue for the government

Question 9

Quota

Answer 9

An import barrier that sets limits on the quantity or value of imports that may be imported into a country

Question 10

Subsidy

Answer 10

An amount of money paid by the government to a firm, per unit of output, to encourage production and provide the firm an advantage over foreign competition

Question 11

Administrative barriers

Answer 11

Trade barriers in the form of regulations that aim to limit imports into a country. These barriers may take the form of product safety standards, sanitary standards or pollution standards but may also include more stringent than necessary application of customs procedures

Question 12

Economic integration

Answer 12

Economic interdependence between countries usually involving agreements between two or more countries to phase-out or eliminate trade and other barriers between them

Question 13

Preferential Trade Agreements (PTA)

Answer 13

Where a country agrees to give preferential access (e.g. reduced tariffs) for certain products to one or more trading partners

Question 14

Trading bloc

Answer 14

A group of countries that have agreed to reduce protectionist measures like tariffs and quotas between them

Question 15

Free trade areas/agreements

Answer 15

An agreement between two or more countries to phase-out or eliminate trade barriers between them, members of the agreement to maintain their own trade policy towards non-members (EFTA) (USMCA)

Question 15

Customs unions

Answer 15

An agreement between countries to phase out or eliminate tariffs and other trade barriers and establish a common external barrier toward non-members (SACU) (EACU)

Question 16

Common markets

Answer 16

When a group of countries agree not only to free trade of goods/services but also to free movement of capital and labour

Question 17

Monetary union

Answer 17

Where two or more countries share the same currency and have a common central bank