Midterm 1 Flashcards

(37 cards)

1
Q

Trade

A

Exchange of goods and services across boarders

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2
Q

Imports

A

Domestic purchase of foreign produced goods and services

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3
Q

Exports

A

Sale of domestically produced goods and services

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4
Q

Free Trade

A

No artificial barriers to the exchange of goods and serves national markets

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5
Q

Absolute Advantage

A

Producing a good more efficiently than any other country

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6
Q

Comparative Advantage

A

Producing a good at a lower opportunity cost than any other country

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7
Q

Antilumping Duty

A

Special tariff on injurious imports priced at less than normal value

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8
Q

Countering Duty

A

Special tariff to offset lower price of imports subsidized by a foreign country

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9
Q

Non-Tariff Barriers

A
  • Import quotas
  • “Voluntary” export restraints
  • Import licensing requirement
  • Technical standards
  • Health ad bio-safety rules
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10
Q

Public Good

A
  • Non-excludable: Can’t prevent other from using it
  • Non-rival: Doesn’t diminish if others use it
  • Positive Externalities: Benefits even those who don’t contribute
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11
Q

Collective Action Theory

A

Groups can successfully overcome their collective action problem and lobby for protection if:

  • They are a small group
  • Geographically connected
  • Similar interest
  • Opportunity to meet and coordinate
  • They have a lot to gain
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12
Q

Factor

A

A resource used for production (labor, capital, and land)

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13
Q

Trad Patters (Factors Model Hypothesis)

A
  1. ) A country has comparative advantage in producing products that intensely uses relatively abundant factors
  2. ) A country exports products that use its relatively abundant factors and imports
  3. ) This lets us predict which products a country will export/import and which countries it will trade with most
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14
Q

Income Effects of Trade

A

Trade makes income to relatively scare factors fall and income to relatively abundant factors increase

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15
Q

Factor Price Equalization

A

Trade makes income levels of a given factor converge across countries overtime

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16
Q

Policy Preferences

A

Owners of relatively abundant factors should support free trade
Owners of relatively scarce factors should support trade protection

17
Q

Political Parties

A

Assumption: Political parties are coalitions among factor owners

  • Left -> laborers
  • Right -> Owners of capital and land (industrialist)
18
Q

4 Big Things from the Factors Model

A
  1. ) Tells us what each country should trade
  2. ) Tells us who each country should trade with
  3. ) Tells us who is gaining/losing from trade in each country
  4. ) Tells us what partisan division we should see
19
Q

Export Oriented

A

Rely on relatively abundant factors -> should prefer free-trade

20
Q

Import Competing

A

Rely on relatively scarce factors -> Should prefer trade protection

21
Q

Sectors Model Predictions

A
  1. ) Import competing industries prefer protection
  2. ) Export oriented industries prefer free trade
  3. ) Labor, unions, and management in a given industry share the same preferences about trade
  4. ) Country Label Prediction: When the economy becomes more export dependent, a government is more likely to liberate trade policy
  5. ) Partner-level Prediction: There is less domestic opposition to free trade arrangement with partners to a country that exports more and imports less
22
Q

Collective Action Theory (summary)

A
  1. ) Producers dominate
  2. ) Predicts more protection than actually occurs
  3. ) No politics
23
Q

Factors Model (summary)

A
  1. ) Comparative advantage is key
  2. ) Has politics (left = labor, right = industrialist)
  3. ) Overlooks differences in sectors
24
Q

Sectors Model (summary)

A
  1. ) Doesn’t explain comparative advantage
  2. ) Builds on factors model and explains differences between factors
  3. ) More applicants when there are high adjustment costs
25
Democracy
A political system in which candidates compete for political office through frequent, fair elections in which a sizable portion of the adult population can vote - Send credible signals and credible commitments
26
Democracy and Trade
Democracy shifts representation to different interest within a country
27
Economic Power
The ability to set the terms of trade
28
Monopsony
A situation in which there is only one buyer of a good
29
Price Setter
The entity or entities that set the price of the good
30
Elasticity of Demand
How much your country's consumers purchases of the good will be reduced if the good's price goes up
31
Embargo
An official ban on trade or other commercial activity with a particular country
32
National Security
concern for the survival of the state, protection of the country from foreign threats
33
Externality
Costs or benefits of one country's choices for otherS
34
Anarchy
The absence of a national government able to make and enforce inter-state agreements
35
General Agreement on Tariffs and Trade (GATT)
1. ) Liberalization: Lowering tariffs and other non-tariff barriers 2. ) Non-discriminatroy: Everyone is treated the same (sort of) 3. ) Reciprocity: Do unto others as they have done unto you 4. ) Safeguards: (Temporary) escape clause
36
Free Trade Agreements
Governments eliminate tariffs on others members goods, but relative independent tariffs on non-memebrs.
37
Customs Union
Members eliminate all tariffs on trade between members and impose a common tariff on goods entering from non-members