international trade Flashcards
(26 cards)
import def
goods and services purchased from other countries
export def
goods and services sold to other countries
autarky def
when a country tries to become self-sufficient and does not trade with foreign countries
globalization def
the growing economic links between different countries
benefits of trade
- lower price
- more choices for consumers
- access to unavailable resources
- economies of scale
- higher competition
- foreign currency
List the theories of international trade
- Absolute advantage theory Adam Smith 1776
- Comparative advantage theory David Ricardo 1817
the comparative advantage theory
- specialize in one good
- increase productivity of a country
- allows greater total output
the ability to produce at a lower opportunity cost than another country
sources of comparative advantage theory
- different climate
- different technology = greater experience + innovation
- Factor endowments (possession)
absolute advantage theory
- no reasons to trade
- use of protectionism: tariffs, quotas and subsidies
the ability to produce more efficiently than another country
protectionism def
the restriction of international free trade by governments.
Measures include quotas, tariffs, embargoes and import duties.
tariffs def
A government tax or duty applied to a price of an import as it comes into a country.
quotas def
Is a physical limit imposed on the amount of goods which may be imported, expressed as the number of cars, beef
other forms of protection
- voluntary export restraints (VERs)
- administrative obstacle
- anti-dumping
the WTO
World Trade Organization
arguments for protectionism
- domestic employment
- infant industries
- prevent dumping
- standarts
- protect strategic industries
- raise revenue
arguments against protectionism
- misallocation of resources
- trade war
- higher priced import
- reduce competitiveness
anti-dumping measures
measures are imposed by governments against exports of goods and services, which are sold into their country below the cost of production.
dumping def
when the price of a country’s exports is below the true costs of
production.
administrative obstacles def
Bureaucracy. VERs, voluntary export restraints, through pressuring country
voluntary export restraints def
imposed restriction by an exporting country on the volume of its exports.
protective subsidies def
Subsidies given to protect infant industries/domestic producers
specialization def
method of production where a business or area focuses on the production
factor intensive goods def
producing a good that requires a lot of one resource
factor endowment def
the amount of land, labor, capital or entrepreneurship that a country possesses and can use for manufacturing
