Why Nations Trade
Physical Capital
things people use to produce final goods and services (a tool)
Economic Interdependence
a situation in which producers in one nation depend on others to provide goods and services they do not produce
Free trade
trade without restrictions or barriers to trade
Barriers to Trade
policies that protect a nation’s businesses by limiting imports from other countries
UN (must tell what it stands for AND what it does)
United Nations
- An international organization whose goal to facilitate cooperation in international law, international security, economic development, social progress, human rights, and achieving world peace.
Human Capital
the knowledge and skills a worker gains through education and experience
Absolute Advantage
the ability of one nation to make a product more efficiently than another nation (make more of a product)
Domestic Goods
those produced by the U.S.
Foreign Goods
those produced by countries other than the U.S.
EU (must tell what it stands for AND what it does)
European Union
- Economic and political union of 27 member states, located primarily in Europe
Specialization
when individuals or businesses produce a narrow range of products; those they produce best
Comparative Advantage
the ability of one nation to produce something at a lower opportunity cost than another nation
Tariff - be specific
tax on imports
Revenue Tariff
tariff applied to products not being produced domestically (provides the federal government with revenue)
NAFTA (must tell what it stands for AND what it does)
North American Free Trade Agreement
- Trade group in North America created by the governments of the US, Canada, and Mexico
Land-Intensive Goods
goods in which land requirement as input is high (you need alot of land to make the product)
Trade Deficit
when imports are more than exports
Protective tariff
tariff put in place to protect domestic producers from foreign competition
Import Quota
- a limit on the quantities or total values of specific items that are imported in a given time period
WTO (must tell what it stands for AND what it does)
World Trade Organization
- Oversees world trade agreements reached by member countries, rules on trade disputes between them
Product Differentiation
Products from different countries are made differently - quality and characteristics
List 2 key US EXPORTS
Chemicals
Agricultural Products
Consumer Durables
Semiconductors
Aircraft
Export Subsidy
a government payment to a domestic producer of export goods designed to help the producer
List 2 Effects of Tariffs
- Decline in consumption
- increased domestic production
- decline in imports
- tariff revenue
IMF (must tell what it stands for AND what it does)
International Monetary Fund
- International organization that oversees the global financial system by following economic policies of its member countries, in particular exchange rates and payments