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Econ Chapter 16
| Question | Answer |
|---|---|
| Exports | the goods and services that it produces and sells to other nations |
| Imports | goods and services one country buys from another |
| Absolute Advantage | when a country can produce more of a products than another country |
| Comparative Advantage | the ability to produce a product relatively more efficiently, or at a lower opportunity cost |
| Opportunity Cost | the cost of the next best alternative |
| Tariff | a tax placed on imports to increase their price in the domestic market |
| Quota | a limit placed on the quantities of a product |
| Protective Tariff | tariff that is high enough to protect less-efficient domestic industries |
| Revenue Tariff | tariff that is high enough to generate revenue for the government without actually prohibiting imports |
| Protectionists | people who favor trade barriers to protect domestic industries |
| Free Traders | want fewer or no trade restrictions |
| Infant Industries Argument | says new or emerging industries should be protected from foreign competition and this argument is used to justify trade barriers |
| Balance of payments | the difference between the money a country pays out to, and receives from, other nations when it engages in international trade |
| Most favored nation clause | provision allowing a country to receive the same tariff reduction that the United States gives to any third country |
| World Trade Organization (WTO) | administers trade agreements signed under GATT, settles trade disputes between nations, organizes trade negotiations, and provides technical assistance and training for developing countries |
| General Agreement on Tariffs and Trade (GATT) | this was signed in 1947 by 23 countries and it extended tariff concessions and worked to eliminate import quotas |
| North American Free Trade Agreement (NAFTA) | agreement to liberalize free trade by reducing tariffs among three major trading partners: Canada, Mexico, and the United States |
| Foreign Exchange | different currencies used to facilitate international trade |
| Foreign Exchange Rate | the price of one country's currency in terms of another country's currency |
| Fixed Exchange Rates | a system under which the price of one currency is fixed in terms of another currency so that the rate does not change |
| Flexible Exchange Rates (also called Floating Exchange Rates) | under these the forces of supply and demand establish the value of one country's currency in terms of another country's currency |
| Trade deficit | A country will have this whenever the value of the products it imports exceed the value of the products it exports |
| Trade Surplus | whenever the value of exports exceeds the value of imports |
| Trade-weighted value of the dollar | this is the measurement of the strength of the dollar against other country's currency, when this falls that means that imports the country wants to buy are more expensive then the products they are exporting to other countries. |
Created by:
elizabeth.butler
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