International Trade

Question 0

Comparative advantage

Answer 0

One nation can produce a good at A lower opportunity cost than the other

Question 1

Absolute advantage

Answer 1

One nation can produce more output with the same resources

Question 2

Closed economy

Answer 2

One that does. My interact with other economies in the world ex) Cuba North Korea

Question 3

Open economy

Answer 3

One that interacts freely with other economies around the world

Question 4

Exports

Answer 4

Goods and services produced domestically and sold abroad p

Question 5

Imports

Answer 5

Goods and services that are produced abroad and sold domestically

Question 6

Net exports

Answer 6

The value of a nations exports minus the value of its imports

Question 7

Trade deficit

Answer 7

When net exports are negative imports> exports

Question 8

Trade surplus

Answer 8

When met exports are positive exports>imports

Question 9

Balanced trade

Answer 9

When net exports are zero or exports and imports are exactly zero

Question 10

Factors that affect net exports

Answer 10

Prices of goods at home and abroad
Exchange rates for home money to foreign
Policies of govt toward international trade
Tastes of consumers for domestic and foreign goods
Incomes of consumers at home and abroad
Costs of transporting goods from country to country

Question 11

Balance of payments (BOP)

Answer 11

Accounting record of all monetary transactions between a country and the rest of the world

Question 12

Financial accounts surplus

Answer 12

Means that the US buys a lot of imports

Question 13

Current account deficit

Answer 13

Means that a lot of foreign capital is flowing into the US particularly from china

Question 14

Currents account

Answer 14

Money spent on exports and imports of goods and services, net investment income(us earnings on investment abroad minus foreign earning from capital invested in US), Net transfers(foreign aid, pensions paid to US citizens living abroad and funds immigrants send to family abroad)

Question 15

Financial accounts

Answer 15

Records the flow if money form the purchase and sale of real and financial assets domestically and abroad

Question 16

Variable that influence financial accounts

Answer 16

1) real interest rated being paid on foreign assets
2) real interest rates being paid on domestic assets
3) perceived economic and political risks of holding assets abroad
4) government policies that affect foreign ownership if domestic assets

Question 17

Balance of payments deficit

Answer 17

A balance of payments deficit is the amount by which the quantity supplied of a currency exceeds the quantity demanded

Question 18

Tariff

Answer 18

The us imposes a tariff of more than 10%on imports of textiles and shoes

Question 19

Quota

Answer 19

Specifies the maximum amount if good that is permitted into a county as imports or out of a country exports

Question 20

Export subsidy

Answer 20

Payment by a govt to exporters to permit them to reduce the selling prices of their goods so they can compete more effectively on foreign markets

Question 22

Trade embargo

Answer 22

Laws forced by a govt preventing the import of a particular good or goods from a country

Question 23

arguments for trade restrictions

Answer 23

National Defense
Protect "infant Industries"
Prevent "Dumping"
Preservation of Domestic jobs
Maintain Diverse Economy
Prevent Exploitation

Question 24

Arguments for Free Trade

Answer 24

Lower Prices
More CHoice
Better Quality
Better Diplomatic Relationships
Fewer Wars
Reduce terrorism
Increase foreign incomes to increase your own exports

Question 25

Nominal Exchange rate

Answer 25

rate at which a person can trade the currency of one country for the currency of another

Question 26

appreciation

Answer 26

refers to an increase in the value of a currency as measured by the amount of foreign currency it can buy

Question 27

depreciation

Answer 27

refers to a decrease in the value of a currency as measured by the amount of foreign currency it can buy

Question 28

real exchange rates

Answer 28

rate at which a person can trade the goods and services of one country for the goods and services of another ( compares foreign goods in the doemstic economy

Question 29

US net exports

Answer 29

exports rise when the dollar depreciates, and imports decrease, when the dollar appreciates so exports decrease, imports increase

Question 30

purchasing power parity theory

Answer 30

theory of exchange rates whereby a unit of any given currency should be able to but the same quantity of goods in all countries

Question 31

law of one price

Answer 31

a good must sell for the same price in all locations

Question 32

arbitrage

Answer 32

taking advantage of differences in prices in differents markets

Question 33

interest rates increase in us

Answer 33

if interest rates in the us increase do does the demand for us bonds, which then increases the demand for the dollar, which decreases exports and increases imports, net exports would become negative,

Question 34

net export effect (increased interest rates)

Answer 34

a decrease in net exports will decrease aggregate demand, this decrease in aggregate demand will decrease price level, output, and employment.

Question 35

Interest rates decrease in US

Answer 35

demand for us bonds decrease if interest rates decrease,which would decrease the value of the dollar, which would increase exports and decrease imports, net exports would become positive

Question 36

Net export effect( decreased interest rates)

Answer 36

increase in net exports will increase aggregate demand, which increases price level, output and employment