Unit 7: Industrialization And Economic Development Patterns And Processes Chapter 19: Topic 7.6 Flashcards
Occurs when one party desires a good or service that it does not have or cannot produce and another party has the desired good or service with which it is willing to take part.
Trade
A system of exchange in which no money changes hands. EX: To Kill a Mockingbird: lawyer defends poor farmer legally in exchange of bags of food.
Barter
The ability to produce a good or service at a lower cost than others. EX: Chinese workers receive lower wages than US workers. Therefore, Chinese companies can manufacture products at a lower cost.
Comparative Advantage
When a country has the income, goods, or services that the other country desires. EX: Canada is a producer of maple syrup because of its climate and trees but it produces no coffee. Costa Rica is famous for its coffee because of its terrain and climate but it produces no maple syrup. Canadian merchants import coffee from Costa Rica while Costa Rican merchants import maple syrup from Canada.
Complimentary
Laws that reduced barriers to trade. Since the end of WW2 most core countries have supported this because of its benefits to corporations and consumers. Increases trade
Free Trade
A set of reforms that reduced government regulations and taxation. 1980s, president Ronald Reagan and UK prime minister Margaret Thatcher advocated for this. Free trade was a cornerstone for this ideology. Increases trade
Neoliberal Policies
UN - economic sanctions to pressure countries to reduce human rights abuses.
US govt increase tariffs on Chinese made goods sold in the US. In hopes of making these products more expensive and US consumers would buy more US made goods. In return, China reduced its purchase of US farm products and increased tariffs on US made goods. Gap between imports from China and exports to China remains the same.
Health problems, diffusion of disease. 2020 - covid 19 which closed factories, disrupted transportation and reduced consumer demand for many products.
Policies decreasing trade
1) Tax breaks- Tax holiday (temporary exemption of some taxes) and a tax break for money invested in research and development.
2) Loans- Forgivable loans (does not have to be repaid), money to borrow at below normal interest rates.
3) Direct assistance- Land or building use free of charge, infrastructure such as roads and sewers paid for by the government, subsidy for each full-time job created
4) Changes in regulations- Legislation that weakens unions, legislation that reduces environmental laws
5) Tariffs- Taxes imposed on imported products make these products less attractive and domestically produced goods more attractive.
Government efforts to promote economic growth (5)
Groups of countries that agree to a common set of trade rules. EX: US-Mexico-Canada agreement, OPEC, etc.
Trading Blocs
Southern Common Market, includes several South American countries.
Mercosur
Global organization. Created in 1995 to monitor the rules of international trade, settling a between its members, supporting the needs of developing countries, and helping companies follow similar international trade policies. 2020 –> 164 countries 98% of global trade. Another 20 countries have applies for membership
World Trade Organization (WTO)
Strengthened links among countries’ economies in other countries
Growth in 1 country can result in new economic opportunities in other countries
Economic downturn in one country can lead to economic challenges elsewhere
Impacts of economic interdependence
1945 to aid countries caught in need of financial assistance. Promotes economic stability. Takes place in forms of loans or assistance in overhauling the country’s economic system. Works to promote monetary cooperation, facilitate international trade, increase employment, encourage sustainable growth, and reduce poverty.
International Monetary Fund (IMF)
