1.
appreciation: dollar price of yen decreases, dollar appreciated relative to yen (worth $1 yes, pay $.90)
2.
comparative advantage: situation in which a person/ctry can produce a specific product at a lower opp cost than some other person/ctry; basis for specialization and trade (trade for variety and options, and raise competition)
3.
depreciation: dollar price of the yen increases, dollar depreciates relative to yen (worth $1 of yen, you pay more)
4.
economic flows: link US economy to other nations economies: goods/service flows (trade flows), capital/labor flows (resource flows), info/tech flows, financial flows
5.
exchange rate: rate at which the currency of one nation can be exchanged for the currency of another nation
6.
foreign exchange market: is a place which various national currencies are exchanges for one another, serves this need
7.
gov't interferes with free trade: 4 ways:
protective tariffs (35% on import, raise price)
imports quotas (limit #s)
nontariff barriers (only certain # co allowed)
export subsidies (give $ by gov't to make up for fall in world market price)
8.
tariffs/quotas: benefit domestic producers of protected products, but harm domestic consumers who must pay higher than world prices for the protected goods; also hurt domestic firms that use the protected goods as inputs for production
9.
terms of trade: mutually beneficial to both countries since each can "do better" through such trade than through domestic production alone
10.
trade deficit: occurs when imports exceed exports
11.
trade surplus: occurs when exports exceed imports
