Chapter 3: International Economics Flashcards
(24 cards)
Exchange rate
External value of one currency expressed in terms of another currency.
Appreciation
Value of a country’s currency rises against another currency. (floating ER)
Depreciation
Value of a country’s currency falls against another currency. (floating ER)
Protectionism
Policies that aim at restricting the flow of imports into a country and/or creating an artificial advantage to exporting firms.
Tariff
Tax on price of imported good, so domestic consumers buy less.
Quota
Limit on the volume of an imported good allowed into a country.
Embargo
Ban on a certain imported good, or on all imports from a country.
Trade liberalization
Removal of barriers to trade between countries.
Fixed exchange rate
ER regime where value of currency is fixed to another by the government
Floating exchange rate
ER regime where value of currency is determined by market forces
Managed exchange rate
ER regime where value of currency is determined by market forces, with the government intervening to stabilise it
Balance of payments (BOP)
Record of the value of all transactions between residents of one country and the rest of the world, over a period of time.
Economic integration
Process whereby countries coordinate and link their economic policies.
Trading blocs
Group of countries that join to increase trade and/or to gain economic benefits.
Balance of trade
Difference between value of exports and value of imports over a period of time
Capital account of BOP
Records unilateral transfers of capital e.g. forgiveness of debt along with transfer of non-produced and non-financial assets.
Current account of BOP
Records value of exports and imports in a period of time. More precisely, the current account includes visible trade and invisibles. The latter include trade in services and net investment income as well as net transfers
Devaluation
Decrease in value of a currency in fixed ER system
Revaluation
Increase in value of a currency in fixed ER system
Financial account of BOP
Includes long term and short term capital flows. Records the portfolio and FDI into and out of a country over a period of time as well as changes in reserve assets.
World Trade Organization
Global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments.
World Trade Organization Objectives
Promote trade liberalisation
Sets trade rules and ensures they are followed
Arbitrator of trade-related disputes
Free trade
Importing and exporting without trade barriers
Foreign Direct Investment
When foreign firms establish a new company or acquire controlling interest in an existing one in a foreign country.
