Free Trade
Trade without barriers
What is Free Trade?
An amount of money granted by the government to a firm or industry
What is a subsidy?
Agreement among countries to remove all barriers to trade with each other. Countries are free to set their own barriers to non-member countries
What is a Free Trade Area?
A marketplace where different national currencies across the globe are traded
What is Forex?
The party that gains revenue from imposing a tariff
What is the domestic government?
Producing more than another country
What is Absolute Advantage?
A physical limit on the volume of a particular good entering the country from abroad
What is a quota?
An area of economic integration that allows nations to trade freely with each other, set a common external policy and allow free movement of factors of production between member states
What is a common market?
The buying and selling of foreign currency in the hope of making a profit from movements in its value
What is speculation?
Trade protection policies that result in deadweight loss
What are tariffs, subsidies, and quotas?
When a nation focuses its productive efforts on a limited number of goods
What is specialisation?
A restriction on trade imposed by a foreign country. It could be set on a product or even as a ban on an entire nation
What is an embargo?
Disadvantages of trading blocs
Loss of sovereignty, The difficulties of engaging in multilateral trade negotiations
Money sent back home from workers working abroad
What are remittances?
The amount of land, labour, capital, and entrepreneurship that a country possesses and can exploit for manufacturing
What are factor endowments?
What is a tariff?
Under this agreement, selected nations provide trade benefits to less developed countries (LDCs)
Three sources of supply of a currency
People who want to buy imports, people who want to invest overseas, people travelling abroad, speculators, central banks
Three limitations of the theory of comparative advantage
There are only two countries. They only produce two goods. There is full employment of resources in the best way. There is perfect information Technology is constant. There are zero transport costs.
Creator of the theory of comparative advantage
Who is David Ricardo?
A trade policy tool where an exporting country voluntarily agrees to reduce the volume of exports
What is a Voluntary Export Restraint (VER)?
The requirements for countries to enter the Economic and Monetary Union (EMU) in Europe, and adopt the euro as their national currency. It includes budget deficit, debt, inflation, interest rates and exchange rate control
What is the Maastricht Criteria or convergence criteria?
Situation for a currency that makes exports cheaper, which means that the export industries within a nation would have an advantage against foreign competitors. Is also seen by other countries as an unfair trade practice
What is undervalued currency?