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34 terms

Chapter 16 International Trade

STUDY
PLAY
Exports
Goods/Services that are produced and sold to other nations
Imports
Goods/Services that one country buys from another
Absolute advantage
One country can more of a product than another
Specialization
some countries focus on producing good/services that they are good at.
Comparative advantage
when a country has the ability to produce a product relatively more efficiently, or at a lower opportunity cost
opportunity cost
the best alternative when making a choice. It is what you didn't choose.
tariff
a tax placed on imported goods
protective tariff
a tariff high enough to protect less efficient domestic industries
revenue tariff
generates revenue for the government
quota
a specific limit or number of a product that can be imported
standards
we have certain standards that many products must meet to be imported (FDA inspection)
protectionists
support trade barriers to protect domestic companies
free trader
supports little or no barriers to trade
infant industries
new and emerging industries (argument for protection until they can compete)
embargo
no trade with a nation--usually for political reasons
balance of payments
the difference between the money a country pays out to and receives from other nations
Smoot-Hawley Tariff
restrictive tariff, price increased nearly 70%, other nations retaliated (greatly restricted international trade)
Reciprocal Trade Agreements Act
1934, reduced tariffs, contained most favored nation clause
Most favored nation clause
allows a third country to have the same tariff policy as the two original nations
GATT
1947, General Agreement on Tariffs and Trade, reduced import quotas and trade restrictions
WTO
Works to help trade flow smoothly among nations & took over much of GATT
NAFTA
North American Free Trade Agreement--1993 Lowered trade barriers between Canada, U.S., and Mexico
Foreign Exchange
foreign currencies used to facilitate trade among nations
Foreign Exchange Rate
the price of one country's currency in relation to anothers
Fixed Exchange Rates
a rate of exchange that doesn't change--commonly used when we operated on the gold standard
Gold Standard
All currencies would have an actual gold value
Flexible Exchange Rates
value set by supply and demand (also called floating exchange rate)
Trade Deficit
value of products imported is greater than the value of goods exported
Trade Surplus
value of products imported is less than the value of goods exported
Weak dollar
the value of the dollar is less than that of other countries, foreign goods are more expensive; exporters are helped
Strong dollar
the value of the dollar is more than that of other countries, foreign goods are less expensive; importers are helped
Multinational Corporation
does business--sales and manufacturing in different countries around the world
outsourcing
sending jobs/production to other countries
trade-weighted value of the dollar
index that displays strength of the dollar compared to major foreign currencies