International Trade

Question 1

Absolute advantage

Answer 1

Occurs when a country can produce a product using fewer fop than another.

Question 2

Comparative advantage

Answer 2

A country should specialise in the g/s it can produce at the lowest oppo cost and trade with another
Enables to produce beyond PPF
Mutual benefit

Question 3

Index of term of trade

Answer 3

Index of export p/ index of import p

Question 4

Trading bloc

Answer 4

A grp of countries that have signed an agreement to reduce or eliminate tariffs, quotas and other protectionist barriers bet themselves

Question 5

Trade creation

Answer 5

Welfare gain of joining of customs union
Low tariff

The switch from purchasing products from a high-cost producer to a lower-cost producer

Question 6

Trade diversion

Answer 6

Welfare loss of joining customs union

Common ext tariff

Question 7

Optimum currency A

Answer 7

A grp of countries where efficiency would be maximized by sharing a common currency

Question 8

Preferential trading A

Answer 8

Lower barrier

Question 9

FTA

Answer 9

Free trade, own tariff against non-member

Question 10

Customs union

Answer 10

Common external tariff

Question 11

Common mkt

Answer 11

Free movement of fop

Question 12

Eco union

Answer 12

Harmonization of eco policy

Question 13

Protectionism

Answer 13

When a country take actions to protect its own industries by restricting trade with other countries
Key word: trade restriction

Question 14

Dumping

Answer 14

Sales of goods at less than cost price by foreign producers in domestic market

Question 15

Quota

Answer 15

Physical limit on the quantity of an imported grp

Question 16

expenditure reducing (reduce ça deficit

Answer 16

D level of consumption and AD

Question 17

Expenditure switching (reduce ça deficit

Answer 17

Switch D away for imports towards domestic g/a

Question 18

Globalization

Answer 18

Growing integration and interdependence of the world eco

Question 19

Infant industry

Answer 19

Rationale for protecting domestic firms fr foreign competition until they have grown large enough to achieve Eos to match rival firms

Question 20

Hot money

Answer 20

Money in search of highest sr rate of return available internationally

Question 21

Floating er

Answer 21

Determined solely by the forces of D/S

Question 22

Fixed er

Answer 22

Fix er to the p of another country

Question 23

Managed er

Answer 23

Primarily determined by D/S but the gov may intervene on occasion to influence the er

Question 24

Revaluation

Answer 24

Fixed: upwards adjustment

Question 25

Devaluation

Answer 25

Fixed: downwards adjustment

Question 26

Appreciation

Answer 26

Floating er I

Question 27

Depreciation

Answer 27

Floating er d

Question 28

Transactions D(er

Answer 28

D for currency derives from ppl wishing to buy g/s from that country

Question 29

Speculative D(er

Answer 29

Higher ir attracts speculators to U.K. Banks in order to achieve a higher return

Question 30

Marshall-Lerner condition

Answer 30

Devaluation/depreciation of the er will only improve a CA deficit/increase in net X if the sum of the PEDs for X and M is greater than 1 PEDx+PEDy>1

Question 31

J curve

Answer 31

Depreciation leads to SR d in CA and and LR i in CA

Question 32

Poverty/earning trap

Answer 32

An indi is little better off or worse off when gaining an i in wages bc of the combined effect of increased tax and bene withdrawal

Question 33

Labour mkt flexibility

Answer 33

The degree to which d/s in a labour mkt respond to external changes to return the mkt to equil

Question 34

Interventionist pol

Answer 34

Correct mkt failure

Question 35

Mkt-based pol

Answer 35

Reduce barriers to the free mkt

Question 36

FDI

Answer 36

Spending by firms on productive capacity in other country Purchase of foreign company/setting up of plants

Question 37

FDI Outflow

Answer 37

Debit on financial a | But may lead to inflow on CA

Question 38

What makes up the bop?

Answer 38

Financial a Cap à Current a

Question 39

What makes up financial a?

Answer 39

FDI Hot money Portfolio I Gov i

Question 40

Eva of FDI

Answer 40

Repatriation of profits (investment income)

Question 41

Eva of ça

Answer 41

Primary product dependency

Question 42

Productivity

Answer 42

Output per worker per hour worked

Question 43

competitiveness | List factors that determine non-p and p compe

Answer 43

A country's ad/disadvantage in selling exports in international markets ULC: prod, NMW, flexibility( labour laws, TUs Px:infrastructure, corp tax, inf Quality

Question 44

ULC

Answer 44

Total wage/ unit output

Question 45

E.g. Of expenditure switching

Answer 45

Protectionism and devaluation

Question 46

E.g. Of expenditure reducing

Answer 46

Contractionary

Question 47

J curve

Answer 47

SR fall in BOP following a devaluation Before LR elastic PED for M and X leads to rise

Question 48

crowding out

Answer 48

Public sector spending reduce private sector i

Question 49

Real er

Answer 49

The p of a country's goods relative to abroad when expressed in a common currency

Question 50

AN Containérisation

Answer 50

Easily transferred bet diff modes of transport Reduce cost: less labour=>higher labour productivity Container principle

Question 51

WTO and its aims

Answer 51

Supervise and libéralisé international trade | Libéralisation, rules, dispute settlement

Question 52

Factors that encourages FDI

Answer 52

``` Infrastructure Labourforce skill X tariff X mkt Exchange control ```

Question 53

Ad of fixed er

Answer 53

P stability

Question 54

WTO roles

Answer 54

Anti dumping | Anti protectionism