1Why do nations trade?
because of unequal distribution of resources
2Why do US businesses tend to produce supplies in other countries?
cheaper
3absolute advantage
what is the most in terms of time or product
4comparative advantage
ability to produce products more efficiently
5What is comparative advantage based on?
opportunity cost
6What is an example of comparative advantage?
doctor vs artist making art
7balance of trade
when export = import
8trade surplus
when import more than export
9How does trade surplus affect currency value?
value decreases
10trade deficit
export more than import
11How does trade deficit affect currency value?
increases
12trade barrier
anything preventing good/services from freely entering a territory
13import quota
limit on amount of good imported
14tariff
tax on imported goods
15What is a pro of quota?
domestic businesses gain more revenue
16What are cons of quota?
easy to manipulate the domestic prices and leads to lead of domestic quality
17What is a pro of tariff?
easy to use
18What is con of tariff?
domestic prices rise to meet foreign
19embargo
ban on trade with a country
20What is a con of embargo?
goods/services could become more scarce and expensive
21standards
regulation for imported good
22What are trade standards usually used for?
produce
23subsidies
government support for a domestic business
24What are pros of subsidies?
decrease domestic prices and make it more difficult for foreign competitors
25What is a con of subsidy?
increased taxes || notes:the money has to come from somewhere in order for the government to give out subsidies
26international free trade agreement (IFTA)
cooperation between two countries to reduce trade barriers and tariffs between each other
27What are 3 examples of international free trade agreements (IFTA)?
EU, NAFTA, and ASEAN
28balance of payments
summary of a country's transactions with another country
29current accounts
include all transactions that do not create liability
30What are examples of current accounts?
income, transfer payments, and good/service exchange
31financial/capital accoounts
sale of assets to and from foreigners
34exchange rates
value of a currency compared to another
35depreciate
if the dollar loses value compared to another currency
36What is an example of depreciating dollar?
one dollar that could get 10 pesos now gets 9 pesos
37appreciates
value of the dollar increases in compared to another currency
38globalization
greater access to good/service at lower prices
39What country is the world's largest importer?
US
40For how long has the US had a trade deficit?
decades
41protectionism
protecting domestic business, usually through trade barriers