Trade Flashcards
(23 cards)
Comparative Advantage Theory
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners.
Opportunity Cost
Opportunity cost represents the potential benefits that a business, an investor, or an individual consumer misses out on when choosing one alternative over another.
Imports and Exports
Exports - goods and services sold to other countries
Imports - buying goods and services from other countries.
Balance of Trade
Difference between a country’s exports and imports of goods.
Trade Deficit
When a country imports more goods and services than it exports, resulting in a negative balance of trade
Commodities/Primary Products
Raw materials, basic resourcs. Eg: coal, gold, corn, sugar
North-South Divide
Difference between economic development the north and south of the world. North has more developed countries and South has more developing countries.
Tariffs
Taxes imposed by one country on goods or services imported from another country
Subsidies
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.
Quotas
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.
Trading bloc
A group of countries that have reduced or removed trade barriers for its participants.
Silk route
An ancient trading route that linked China with the West.
Columbian Exchange
The exchange of plants, animals, diseases, people, and ideas between (Europe, Africa, and Asia) and the Americas.
Fair Trade vs Free Trade
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
Cultural Diffusion
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.
Cultural Imperialism
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.
Time-Space Convergence
Process of travel time diminishing as technology advances.
Custom Union
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)
Common Market/Single Market
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
Protectionism
Opposite of free trade, imposes lots of taxes, tarriffs and quotas on any imports.
Monetary Union
When two or more countries share a common currency
Eg: Latin Monetary Union
Currency
Standardization of money in any form.
Supply and Demand
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.
