Trade Blocs & Integration
An agreement where members remove tariffs between themselves but keep their own tariffs for non-members.
What is a Free Trade Area (FTA)?
A tax placed on imported goods.
What is a tariff?
The type of problem where a country can’t meet foreign payment obligations or pay for essential imports.
What is a balance of payments crisis?
A general rise in prices over time.
What is inflation?
Unemployment that occurs in cycles based on timing i.e., waiting for the next harvest cycle.
What is seasonal unemployment?
The main reason countries join a trade bloc
What is increased trade between member countries?
A policy that limits the quantity of an imported good rather than taxing it.
What is a quota?
The institution most associated with short-term stabilization when a country’s currency and reserves are collapsing.
What is the IMF?
When the price stays similar but the product gets smaller or lower quality.
What is shrinkflation?
Unemployment from being between jobs while searching for a better match.
What is frictional unemployment?
An integration level that adds a common external tariff on imports from non-members.
What is a customs union?
One reason to use tariffs to protect a certain group
What is protecting domestic industries?
The institution most associated with long-term development projects like infrastructure and education.
What is the World Bank?
If prices rise but your paycheck stays the same, you can buy fewer things. That means your ________ went down.
What is purchasing power?
Unemployment caused by a recession reducing overall demand for goods and services.
What is cyclical unemployment?
A common problem when countries agree to remove tariffs but leave different product standards, inspections, and licensing rules in place.
What are non-tariff barriers limiting trade?
A likely effect of tariffs on consumers:
What are higher prices?
What lenders use to reduce the chance of repeated crises.
What are policy conditions / structural reforms?
A common danger of deflation: people postpone spending, which can reduce demand and increase unemployment.
What is a deflationary spiral?
Unemployment caused by a skills mismatch when industries change.
What is structural unemployment?
The biggest political-economic tension in “deep integration,” especially during recessions or crises.
What is shared rules vs national flexibility/sovereignty during shocks?
When one country puts tariffs on another, the targeted country may respond by placing tariffs back.
What is retaliation (or a trade war)?
A situation where a country needs both urgent foreign currency support now and productivity-building investment over time.
What is a combined stabilization + development approach (IMF + World Bank roles)?
When inflation rises, this group often benefits because they repay fixed debts with money that is worth less than before.
Who are borrowers
The best general policy response to structural unemployment.
What are retraining/education and mobility support?