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International Trade Vocabulary

Terms in this set (24)

Globalization
The interaction of people, companies and governments from different nations
Outsourcing
When a firm in one country tries to reduce costs by locating production facilities in other countries
Free Traders
People in favor for the voluntary exchange of goods and services in the absence of trade barriers and restrictions
Protectionists
People against the voluntary exchange of goods and services and are in favor of trade barriers and restrictions
Absolute advantage
The ability to produce more units of a good or service than some other producer, using the same quantity of resources
Comparative advantage
The ability to produce a good or service at a lower opportunity cost than some other producer
Balance of trade
The relationship between a nation's imports and exports
Trade deficit
Importing more goods and services than you export
Trade surplus
Exporting more goods and services than you import
Trade barrier
Restrictions that prevent free trade among nations
Tariff
a tax on imported goods or services
Quota
The limit on the quantity of a product that may be imported or exported, established by government laws or regulations
Embargo
The prohibition of trading with another country
Standards
Laws passed to keep out goods and services
Subsidy
A government payment that supports a domestic business or market
Trading bloc
An agreement between countries to lower or eliminate trade barriers. The EU, NAFTA, and ASEAN are examples
NAFTA
An organization that helps increase trade. It started in 1994. It includes the U.S., Canada, and Mexico only
ASEAN
It started in 1967. It includes many countries in Southeast Asia
European Union
It started in 1951. It includes 28 (soon to be 27) countries in Europe and many members use a common currency
Exchange rate
The price of one nation's currency in terms of another nation's currency
Floating Exchange Rate
An exchange rate that is determined by the international demand for and supply of a nation's money
Fixed Exchange Rate.
an exchange rate that is not determined by the international demand or supply of a nation's money. It stays fixed compared to another country's currency
Appreciation
When a currency gains in buying power compared to other currencies
Depreciation
When a currency decreases in buying power compared to other currencies.
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