International economics Flashcards
(40 cards)
administrative barriers
- trade protection measures in the form of administrative procedures that countries can use to prevent free flow of imports into a country (NOTE: not the obvious trade protection measures like tariffs)
ex) controls on packaging, customs procedures like inspections
anti-dumping
- justifies trade protection policies
- if a country’s trading partner practices dumping, the country can impose trade protection measures to limit quantities of dumped good
appreciation of a currency
-increase in the value of a currency in a floating exchange rate system or managed exchange rate system
automatic stabilisers
- factors that automatically work toward stabilizing the economy by reducing the short term fluctuations of the business cycle
- include progressive income taxes and unemployment benefits
balance of payments
- a record of all transactions between the residents of a country and the residents of other countries, showing all payments received from other countries (credits), and all payments made to other countries (debits)
- sum of credits should be equal to sum of debits
balance of trade in goods
the value of exports of goods minus the value of imports of goods over a specific time (usually a year)
balance of trade in services
the value of exports of services minus the value of imports of services over a specific time (usually a year)
balance on capital account
the sum of inflows minus outflows of funds in the capital account of the balance of payments
balance on current account
the sum of inflows minus outflows of funds in the current account of the balance of payments
balance on financial account
the sum of inflows of funds minus outflows in the financial account of the balance of payments
bilateral trade agreement
any trade agreement involving two trading partners, usually two countries. It can also involve a trade agreement between one country and another group of countries when this group acts as a single unit
Ex) European Union
common market
a type of trading bloc in which countries that have formed a customs union proceed further to eliminate any remaining tariffs in trade between them; they continue to have a common external policy, and agree to eliminate all restrictions on movements of any factors of production
Ex) European Economic Community (EEC), the precursor of the present European Union
credit items
the payments received from other countries, entering the balance of payments accounts with a plus sign; they represent an inflow of foreign exchange into a country
current account
-includes the balance of trade (exports o minus imports of goods) plus the balance on services (exports of services minus imports of services), plus inflows minus outflows of income and current transfers
current account deficit
occurs when the current account balance has a negative value, meaning that debits are larger than credits (there is excess of debits)
current account surplus
occurs when the current account balance has a positive value, meaning that credits are larger than debits (there is excess of credits)
current expenditures
- refers to government spending on day-to-day items that are recurring and items that are consumed as a good or service is provided
- include wages and salaries (for gov’t employees), spending for supplies and equipment for daily operation of gov’t activities (ex. school supplies and medical supplies), provision of subsidies, and interest payments on gov’t loans
current transfers
an item in the current account of the balance of payments, refers to inflows and outflows of funds for items including gifts, foreign aid, and pensions
customs union
-a type of trading bloc, consisting of a group of countries that fulfil the requirements of a free trade area (eliminating trade barriers) and adopt a common policy towards all non-member countries
-achieves a higher degree of economic integration than a free trade area, but lower than a common market
Ex) European Union
debit items
payments made to other countries, entering the balance of payments accounts with a minus sign; they represent an outflow of foreign exchange from a country
deficit
the deficiency of something compared with something else
- In the balance of payments, a ‘deficit’ in an account occurs when the credits (inflows of money from abroad) are smaller than the debits (outflows of money to other countries)
- In the case of government budget, a ‘deficit’ occurs when government revenues are smaller than government expenditures
depreciation
decrease in the value of currency in the context of a floating exchange rate system or managed exchanged rate system
devaluation
decrease in the value of currency in the context of a fixed exchange rate system
direct investment
in the balance of payments, refers to inflows or outflows of funds for the purpose of foreign direct investment
