TGF 12: The Political Economy of Trade and Monetary Regulations

Question 0

International political economy

Answer 0

The study of the intersection of politics and economics that illuminates the reasons why changes occur in the distribution of states’ wealth and power.

Question 1

Regional trade agreements (RTAs)

Answer 1

Treaties that integrate the economies of countries within a geographic region by reducing trade barriers among member states.

Question 2

International monetary system

Answer 2

The financial procedures governing the exchange and conversion of national currencies so that they can be bought and sold for one another to calculate the value of currencies and credits when capital is transferred across borders through trade, investment, and loans.

Question 3

Commercial liberalism

Answer 3

An economic theory advocating free markets and the removal of barriers to the flow of trade and capital.

Question 4

Liberal International Economic Order (LIEO)

Answer 4

The set of regimes created after World War II, designed to promote stability and reduce barriers to the free flow of trade and capital.

Question 5

Mercantilism

Answer 5

The seventeenth-century theory preaching that trading states should increase their wealth and power by expanding exports and protecting their domestic economy from imports.

Question 6

Comparative advantage

Answer 6

The concept in liberal economic theory that a state will benefit if it specializes in those goods it can produce comparatively cheaply and acquires through trade goods that it can only produce at a higher cost.

Question 7

Laissez-faire economics

Answer 7

From a French phrase (meaning literally “let do”) that Adam Smith and other commercial liberals in the eighteenth century used to describe the advantages of freewheeling capitalism without government interference in economic affairs.

Question 8

Neomercantilism

Answer 8

A contemporary version of mercantilism that advocates promoting domestic production and a balance-of-payment surplus by subsidizing exports and using tariffs and nontariff barriers to reduce imports.

Question 9

Protectionism

Answer 9

A policy of creating barriers to foreign trade, such as tariffs and quotas, that protect local industries from competition.

Question 10

Import quotas

Answer 10

Limits on the quantity of particular products that can be imported.

Question 11

Export quotas

Answer 11

Barriers to commerce agreed to by two trading state’s to protect their domestic producers.

Question 12

Orderly market arrangements (OMAs)

Answer 12

Voluntary export restrictions that involve a government-to-government agreement and often specific rules of management.

Question 13

Voluntary export restrictions (VERs)

Answer 13

A protectionist measure popular in the 1980s and early 1990s, in which exporting countries agree to restrict shipments to a country to deter it from imposing an even more onerous import quota.

Question 14

Countervailing duties

Answer 14

Tariffs imposed by a government to offset subsidies provided by foreign governments to their producers.

Question 15

Antidumping duties

Answer 15

Tariffs imposed to offset another state’s alleged selling of a product at below the cost to produce it.

Question 16

Infant industry

Answer 16

A newly establishes industry that is not yet strong enough to compete effectively in the global marketplace.

Question 17

Hegemonic stability theory

Answer 17

A school of thought that argues free trade and economic order depend on the existence of an overwhelmingly powerful state willing and able to open and organize world markets.

Question 18

Collective goods

Answer 18

Goods from which everyone benefits regardless of their individual contributions

Question 19

Free ride

Answer 19

To enjoy the benefits of collective goods but pay little or nothing for them.

Question 20

Beggar-thy-neighbor policies

Answer 20

The attempt to promote trade surpluses through policies that cause other states to suffer trade defecits.

Question 21

Money supply

Answer 21

The total amount of currency in circulation in a state, calculated to include demand deposits-such as checking accounts-8’ commercial banks and time deposits-such as savings accounts and bonds-in savings banks.

Question 22

Exchange rate

Answer 22

The rate at which one state’s currency is exchanged for another state’s currency in the global marketplace.

Question 23

Balance of payments

Answer 23

A calculation summarizing a country’s financial transactions with the external world, determined by the level of credits (export earnings, profits from foreign investment, receipts of foreign aid) minus the country’s total international debts (imports, interest payments on international debts, foreign direct investments, and the like)

Question 24

Fixed exchange rates

Answer 24

A system under which states establish the parity of their currencies and commit to keeping fluctuations in their exchange rates within narrow limits.

Question 25

International liquidity

Answer 25

Reserve assets used to settle international accounts.

Question 26

Balance of trade

Answer 26

A calculation based on the value of merchandise goods and services imported and exported. A deficit occurs when a country buys more from abroad than it sells.

Question 27

Floating exchange rates

Answer 27

An unmanaged process whereby market forces rather than governments influence the relative rate of exchange for currencies between countries.

Question 28

Group of Five (G-5)

Answer 28

A group of advanced industrialized democracies composed of the United States, Britain, France, Japan, and Germany.

Question 29

Group of Seven (G-7)/Group of Eight (G-8)

Answer 29

The G-5 plus Canada and Italy; after 1997, known as the G-8 with the addition of Russia.

Question 30

Group of Twenty (G-20)

Answer 30

An informal forum that promotes discussion among the world’s major and top emerging economic powers on global economic issues.

Question 31

Most-favored-nation (MFN) principle

Answer 31

Unconditional nondiscriminatory treatment in trade between contracting parties guaranteed by GATT; in 1997 U.S. Senator Daniel Patrick Moynihan introduced legislation to replace the term with “normal trade relations” (NTR) to better reflect its true meaning.

Question 32

Nondiscrimination

Answer 32

A principle for trade that proclaims that goods produced at home and abroad are to be treated the same for import and export agreements.

Question 33

Subsidies

Answer 33

Financial assistance from governments to support enterprises considered important to public welfare.

Question 34

Regional currency union

Answer 34

The pooling if sovereignty to create a common currency (such as the EU’s euro) and
single monetary system for members in a region, regulated by a regional central bank within the currency bloc to reduce the likelihood of large-scale liquidity crises.