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The buying and selling of goods and services that occurs between countries
International Trade
Involves the exchange of goods and services without the use of currency.
Countertrade
A record of financial transactions between one country and its trading partners, usually recorded over one calendar year
The balance of payments
Straightforward exchange of goods and services between contracting parties
Barter
goods and services that are produced in one country and sold to buyers in another.
Export
What is one barrier to trade?
Customs duties or tariffs
Quotas and licenses
Exchange Control
Physical controls and subsidies
Outflows > Inflows =?
Deficit
Seller agrees to give a portion of his payment in cash and the balance in the product produced by that equipment
Compensation (buy back)
a good or service bought in one country that was produced in another.
Import
What is one problem of international trade?
Infant industries encounter difficulty trying to become established
Loss of a home market may lead to a chain reaction resulting in unemployment in that industry
A country may become overly dependent on another country
A country may suffer from the dangers of overspecialisation
is when a country can produce a good or service in greater quantity for the same cost, or the same quantity at a lower cost, than other producers.
Absolute advantage
One party agrees to sell goods to another and the other agrees to purchase goods from the first party
Counter purchase
If the value of a country's imports exceeds the value of its exports, the country has a negative balance of trade, also known as a _______
trade deficit
(Export unit value index/Import unit value index) X 100
The terms of trade
is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners.
comparative advantage
Trade is based on the multilateral use of bilateral currencies.The clearing accounts are not directly convertible into cash but represent purchasing power for goods manufactured in the countries subscribing to the clearing agreement.
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What are the 3 main reasons for international trade?
Climatic differences
Inequality of natural resources
Specialisation and technological know-how
Records inflows and outflows based on short-term investment, medium-term investment and long-term investment. (Ex: buying or selling factories)
The capital account
The balance of payments consists of what 3 accounts?
The current account
The capital account
Official Financing
Consists of visible and invisible exports and imports
The current account