Trade

Question 1

Comparative Advantage Theory

Answer 1

Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners.

Question 2

Opportunity Cost

Answer 2

Opportunity cost represents the potential benefits that a business, an investor, or an individual consumer misses out on when choosing one alternative over another.

Question 3

Imports and Exports

Answer 3

Exports - goods and services sold to other countries
Imports - buying goods and services from other countries.

Question 4

Balance of Trade

Answer 4

Difference between a country’s exports and imports of goods.

Question 5

Trade Deficit

Answer 5

When a country imports more goods and services than it exports, resulting in a negative balance of trade

Question 6

Commodities/Primary Products

Answer 6

Raw materials, basic resourcs. Eg: coal, gold, corn, sugar

Question 7

North-South Divide

Answer 7

Difference between economic development the north and south of the world. North has more developed countries and South has more developing countries.

Question 8

Tariffs

Answer 8

Taxes imposed by one country on goods or services imported from another country

Question 9

Subsidies

Answer 9

A sum of money granted by a public body or the state to help and industry or business keep the price of a commodity or service low.

Question 10

Quotas

Answer 10

A government imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period.

Question 11

Trading bloc

Answer 11

A group of countries that have reduced or removed trade barriers for its participants.

Question 12

Silk route

Answer 12

An ancient trading route that linked China with the West.

Question 13

Columbian Exchange

Answer 13

The exchange of plants, animals, diseases, people, and ideas between (Europe, Africa, and Asia) and the Americas.

Question 14

Fair Trade vs Free Trade

Answer 14

Fair trade - Seeks to ensure fair wages and better working conditions for producers.
Eg: Brazil exports fair trade coffee to the US

Free trade - Works along with traditional market economy, aims to maximize profit
Eg: NAFTA - USA, Canada, Mexico

Question 15

Cultural Diffusion

Answer 15

When certain cultural values and ideas are adopted by other cultures. Eg: Spread of Buddhism from North India to China and then to Japan through China.

Question 16

Cultural Imperialism

Answer 16

Imposition of a politically or economically dominant country of various aspects of its culture over a non-dominant one. Eg: After Romans conquered Italy, Romans imposed Latin on the people of Etruria, replacing the Etruscan language, leading to the demise of the language.

Question 17

Time-Space Convergence

Answer 17

Process of travel time diminishing as technology advances.

Question 18

Custom Union

Answer 18

Type of trading bloc - a cluster of countries that want to trade with as much ease as possible. All countries need to make decision unanimously. They will have similar tarriffs and taxes

• Sovereign

Eg: EU (European Union)

Question 19

Common Market/Single Market

Answer 19

Countries can made independent decision but still trade within each other. Countries are not sovereign, differences in ideology can cause conflict, puts coutry at risking of losing allies.

Eg: Southern Common Market

Question 20

Protectionism

Answer 20

Opposite of free trade, imposes lots of taxes, tarriffs and quotas on any imports.

Question 21

Monetary Union

Answer 21

When two or more countries share a common currency

Eg: Latin Monetary Union

Question 22

Currency

Answer 22

Standardization of money in any form.

Question 23

Supply and Demand

Answer 23

Supply - total amount of a specific good or service available to consumers
Demand - Customer’s desire to purchase goods and services and willingness to pay a specific price for them.