Concepts
A nation can produce more of a given product using a given amount of resources.
Absolute advantage
A trade restriction with a means of preventing a foreign product or service from freely entering a nation's territory.
A trade barrier
Founded in 1995 to ensure compliance with GATT, to negotiate new trade agreements, and to resolve trade disputes.
The World Trade Organization (WTO)
Protectionism
The use of trade barriers to protect industries from foreign competition.
What is exchange rate?
The value of foreign nation's currency in relation to your own currency.
A nation is better off when it produces goods and services for which it has a comparative advantage.
The law of comparative advantage
A limit on the amount of a good that can be imported.
An import quota
What is a trade war?
A cycle of increasing trade barriers
What is an infant industry?
A new industry.
The exchange rate between the dollar and the SOL increases from 3.8 SOLES per dollar to 4.1 SOLES per dollar.
An appreciation of the dollar or a depreciation of the SOL
The ability to produce a product more efficiently given all the other products that can be produced.
Comparative advantage
What is an embargo?
Total ban on the import of a good from a particular country
What is dumping?
When a foreign firm sells its exports at a lower price than its cost of production.
What is protecting jobs?
Shelters workers in industries that would be hurt by foreign competition.
What is depreciation?
A decrease in the value of a currency.
The U.S. produces 37 cars a day and Japan produces 15 cars a day.
It is an example of absolute advantage
A tax on certain items purchased abroad.
Customs duty
What is the current account?
A record of international receipts and payments, or the account balance equals exports minus imports, plus net interest and transfers received from abroad.
Give examples of protectionism
Protecting jobs, protecting infant industries, etc
What is the foreign exchange market?
The banks and other financial institutions that facilitate the buying and selling of foreign currencies.
China has a comparative advantage in textiles, so they produce textiles.
Specialization
____________ is a record of one country's trade dealings with the rest of the world.
The balance of payments
The 3 accounts that make up the BOP?
Current, Capital and Financial
What is the free trade argument for safeguarding national security?
Certain industries claim trade protection when in fact their products are not essential to national security at all.
What is a fixed-exchange rate system?
A currency system in which governments try to keep the values of their currencies constant against one another.