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FINN 3703 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

events that increase trade volume

A

Growth in international trade

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2
Q

Factors affecting international trade flow (2)

A

inflation, policies

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3
Q

International capital flow (mostly DFI) (3)

A

restrictions, privatizations, taxes, etc.

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4
Q

The ____ account keeps track of the flow of goods and services in and out of the US

A

current

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5
Q

Current account summarizes the flow of funds between one specified country and all other countries due to four transaction types:

A
  • purchases of goods
  • purchases of services
  • income on financial assets
  • transfer payments
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6
Q

U.S. was a net importer of ___

  • U.S. was a net exporter of ____
A

goods (Merchandise) ; services

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7
Q

Bureau of Economic Analysis (BEA)Information about BEA’s international

A

transactions (balance of payments) accounts, including all transactions between U.S. and foreign residents

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8
Q
  • Fall of the Berlin Wall
  • Single European Act
  • NAFTA
  • GATT
  • European Union
  • Inception of the Euro
  • Other trade agreements
  • Outsourcing
  • Trends in US balance of trade
A

Growth in international trade

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9
Q

A relative increase in a country’s inflation rate will decrease its ____ ___, as imports ____ and exports _____.

A

current account; increase; decrease

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10
Q

Impact of National Income - A relative increase in a country’s income level will ____ its current account, as imports ____.

A

decrease; increase

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11
Q

A government may reduce its country’s imports by imposing a ____________, or by enforcing a _____; labor laws, business laws, subsidies, tax breaks, security laws

A

tariff on imported goods; quota

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12
Q

If a country’s currency begins to rise in value, its current account balance will decrease as imports ____ and exports ____.

A

increase; decrease

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13
Q

BOT Deficit:

A

Excess supply of domestic currency

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14
Q
  • domestic currency becomes weaker
  • more export demand
  • Less import demand
  • trade imbalance corrects automatically in long run
A

BOT Deficit

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15
Q

Changes in Restrictions

A

New opportunities may arise from the removal of government barriers.

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16
Q

Potential Economic Growth

A

Countries that have higher potential for economic growth are more attractive.

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17
Q

Tax Rates

A

Countries that impose relatively low tax rates on corporate earnings are more likely to attract DFI.

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18
Q

Exchange Rates

A

Firms typically prefer to invest in countries where the local currency is expected to strengthen against their own.

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19
Q

Privatization

A

DFI has also been stimulated by the selling of government operations.

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20
Q

Tax Rates on Interest or Dividends

A

Investors will normally prefer countries where the tax rates are relatively low.

21
Q

Money tends to flow to countries with ____ interest rates.

A

high

22
Q

Foreign investors may be attracted if the local currency is expected to ____.

A

strengthen

23
Q

promote cooperation, stability in exchange rates, provide temporary funds to members, promote free mobility of capital and free trade

A

International Monetary Fund (IMF)

24
Q

reduce poverty and enhance economic development

A

World Bank

25
Q

trade disputes and other issues

A

World Trade Organization (WTO)

26
Q

promote private enterprise within countries

A

International Finance Corporation (IFC)

27
Q

promote relationships that lead to globalization

A

Organization for Economic Co-operation and Development (OECD)

28
Q

US importers must use their dollars to buy foreign currency – they will represent the ___ of dollars

A

supply

29
Q

Foreigners buying US exports must use their foreign currency to buy dollars – they represent the ___ for dollars

A

demand

30
Q

what is the Percentage change in the nominal exchange rate (dollars per foreign currency) –

A

a positive number represents a currency depreciation

31
Q

what is the Parameters to be estimated –

A

would suggest that beta should be negative

32
Q

In the short run, exchange rates are highly correlated with ___ ___, but are poorly correlated with ____ ____

A

each other; trade balances

33
Q

describes a typical response of trade balances to currency depreciations

A

The J-Curve

34
Q

A trade deficit exists at time 0 –

A

the currency begins to depreciate

35
Q

The current account keeps track of the flow of

A

goods and services in and out of the US

36
Q

A ___ ____ implies that the US is borrowing from the rest of the world (currently, we are borrowing at the rate of $2B per day). A equivalent statement is that the rest of the world is acquiring US assets

A

trade deficit

37
Q

Changes in Assets are recorded in the

A

Capital and Financial Account

38
Q

Capital account summarizes the flow of funds resulting from the ________ between one specified country and all other countries.

A

sale of assets

39
Q

Association of countries that adopt common policies regarding global economic change relative to other countries that are not members of the trade bloc

A

trade blocs

40
Q

Trade blocs usually involved countries that are at a similar level of (3)

A

development, geographically close, sharing borders

41
Q

Initiative started by the United States after WWII (to bring at the table as many countries as possible)

A

Multilateralism

42
Q

started in 1947 (with no more than 25 countries), more countries joined through the years, up until 2001, more than 140 countries

A

GATT

43
Q

group of countries agree on:

  • Reduce tariffs for certain goods
  • (preferential trade)
  • Remove internal trade barriers (free trade)
  • Coordinate external trade barrier (customs union)
  • Free movement of capital and/or labor
  • Coordinate tax policy
  • Tax, monetary policy, banking, etc.
A

World trade organization (WTO) Blocs

44
Q

is a free trade area that also has a free movement of capital

A

NAFTA

45
Q

Eurozone is a

A

monetary union

46
Q

______ _____ is a single market – coordinate tax policies and regulatory policies

A

European union

47
Q

First trade bloc

A

1834 in Germany

48
Q
  • Agreement between 15 countries
  • 3.5 billon people
  • Signed Nov. 2020
  • 1/3 of global GDP
A

RCEP - Regional Comprehensive Economic Partnership

(largest organization)

FINN 3703 (2 decks)

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