Protectionism
A tax placed on imported goods to protect domestic industries.
What is a tariff?
The main benefit of international trade for consumers.
What is increased choice and lower prices?
A trade agreement that removes barriers among members but allows each to set its own external tariffs.
What is a free trade area?
The record of all economic transactions between a country and the rest of the world.
What is the balance of payments?
The price of one currency in terms of another.
What is an exchange rate?
This is a payment made by the government to encourage exports or reduce import competition.
What is a subsidy?
A country that can produce a good using fewer resources than another has this advantage.
What is absolute advantage?
This deeper form of integration involves a common external tariff on non-members.
What is a customs union?
This account includes trade in goods, services, income, and current transfers.
What is the current account?
When a currency’s value increases relative to another, it is said to have done this.
What is appreciation?
This protectionist measure limits the quantity of a good that can be imported.
What is an import quota?
The economic principle that countries should specialize in goods with the lowest opportunity cost.
What is comparative advantage?
The European Union is an example of this level of integration, which allows free movement of goods, services, labor, and capital.
What is a common market?
When a country imports more than it exports, this occurs.
What is a current account deficit?
A depreciation of a country’s currency will make its exports do this.
What is become cheaper to foreign buyers?
This occurs when a firm sells products abroad below domestic price or production cost.
What is dumping?
This occurs when a country chooses to export goods and services for which it has a relative cost advantage.
What is specialization?
When trade shifts from low-cost to higher-cost producers due to a trade bloc, it is called this.
What is trade diversion?
Foreign direct investment (FDI) appears in this section of the balance of payments.
What is the financial account?
A central bank maintaining a set exchange rate is practicing this type of exchange rate system.
What is a fixed exchange rate system?
This argument supports protecting new domestic industries until they become competitive.
What is the infant industry argument?
Trade allows countries to achieve consumption beyond their ______.
What is the production possibilities curve?
This occurs when a trading bloc leads to more efficient, lower-cost imports replacing expensive domestic goods.
What is trade creation?
This theory states that exchange rates should adjust to equalize the price of identical goods across countries.
What is purchasing power parity (PPP)?
This diagram describes how the current account balance may initially worsen after a currency devaluation before improving.
What is the J-curve?