1.
absolute advantage: the ability of a country to produce more of a good or service than competitors, using the same amount of resources
2.
balance of trade: difference between the value of a nation's exports and its imports
3.
comparative advantage: ability of a country to produce a poduct at a lower opportunity cost than another country;
suggestion that countries should specialize in the production of those goods they produce most efficiently and buy goods that they produce less efficiently from other countries, even if this means buying goods from other countries that they could produce more efficiently at home
4.
depreciation: fall in the price of a currency through the action of supply and demand
5.
devaluation: lowering a currency's value in relation to other currencies by government order
6.
embargo: complete restriction on the import or export of a particular good;
a complete ban on international trade of a certain item, or a total halt in trade with a particular nation
7.
european union (EU): organization of european nations whose goal is to encourage economic integration as a single market
8.
exchange rate: the price of one nation's currency in terms of another nation's currency
9.
exports: goods sold to other countries
10.
fixed rate of exchange: system under which a national government sets the value of its currency in relation to a single standard
11.
flexible exchange rates: arrangement in which the forces of supply and demand are allowed to set the price of various currencies
12.
foreign exchange markets: markets dealing in buying and selling foreign currency for businesses that want to import goods from other countries
13.
general agreement on tariffs and trade (GATT): trade agreement under which countries met periodically to negotiate tariff reductions that were mutually advantageous to all members
14.
import quota: restriction imposed on the number of units of a particular good that can be brought into the country
15.
imports: goods bought from other countries for domestic use
16.
international monetary fund (IMF): agency whose member governments once were obligated to keep their foreign exchange rates more or less fixed; today it offers monetary advice and provides loans to developing nations
17.
north american free trade agreement (NAFTA): trade agreement designed to reduce and gradually eliminate tariff barriers among Mexica, Canada, and the US
18.
protectionists: people who argue for trade restrictions to protect domestic industries
19.
protective tariff: tax on imports used to raise the cost of imported goods and thereby protect domestic producers
20.
revenue tariff: tax on imports used primarily to raise government revenue without restricting imports
21.
specialization: concept that a nation should produce and export a limited assortment of goods for which it is particularly suited in order to remain profitable
22.
tariff: tax placed on an imported product
23.
what are the 3 major barriers to world trade?: tariffs, quotas, and embargos
24.
what are the benefits of international trade?: goods bought from other countries for domestic use is about 14% of GDP in the US. we would have no coffee, chocolate, or pepper. more than 60% of the radios, tv.sets, and motorcycles sold in the US are imported. nearly 100%of the nation's bauxite, from which aluminum is made, is imported
25.
world trade organization (WTO): world's largest trade agreement currently with more than 140 nations
