Unit 3 AOS3 Flashcards
(57 cards)
Define international trade
The exchange of goods, services and capital across borders that creates a global economy where prices, supply and demand are determined by global events.
Define free trade
A policy in which a nations governments do not restrict imports or exports allowing goods and services to be traded freely without tariffs or other barriers.
Define trade liberalisation
The removal or reduction of restrictions on the exchange of goods and services between nations including removal or tariffs, quotas and subsidies.
Define protectionism
Economic policies that restrict trade with foreign nations through tariffs, import quotas, subsidies and product standards.
What is a Tariff?
A tax imposed on imported goods and services, making imported products more expensive and thus less competitive against domestic alternatives.
What is a Quota?
A government-imposed trade restriction that limits the number or value of goods and services that can be imported or exported during a particular time period.
What is a Subsidy?
A benefit given by the government to groups or individuals, usually in the form of a cash payment or tax reduction, to remove some type of burden or encourage a particular economic activity.
What is an Import Quota?
A limit on the quantity of a good that can be imported into a country, designed to protect domestic industries from foreign competition.
What is a Non-Tariff Barrier?
Any measure other than a tariff that restricts imports, including technical barriers, bureaucratic delays, and ‘buy local’ policies.
What is Absolute Advantage?
The ability of a country to produce more of a good or service than competitors using the same amount of resources, or the ability to produce the same amount using fewer resources.
What is Comparative Advantage?
The ability of a country to produce a particular good or service at a lower opportunity cost than other countries, even if it doesn’t have an absolute advantage in producing that good.
What is Opportunity Cost?
The value of the next best alternative forgone when making a decision. In trade theory, this refers to what a country gives up to specialize in producing certain goods.
What is Specialization?
The concentration of production on those goods and services in which a country has a comparative advantage, allowing for increased efficiency and output.
What are Economies of Scale?
Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing as scale increases. International trade enables firms to achieve larger scales of production by accessing global markets.
What is Productivity?
A measure of economic efficiency that shows how effectively economic inputs are converted into output. Trade increases productivity by promoting specialization according to comparative advantage.
What are Terms of Trade?
The ratio between the price a country receives for its export commodities and the price it pays for its import commodities, often expressed as the ratio of export prices to import prices.
What is a Trade Deficit?
The amount by which the cost of a country’s imports exceeds the value of its exports; the net outflow of domestic currency to foreign markets.
What is a Trade Surplus?
The amount by which the value of a country’s exports exceeds the cost of its imports; the net inflow of domestic currency from foreign markets.
What is the Balance of Trade?
The difference between the monetary value of a nation’s exports and imports over a certain period. If exports exceed imports, it’s a trade surplus; if imports exceed exports, it’s a trade deficit.
What is the Balance of Payments?
A record of all financial transactions made between consumers, businesses, and the government of one country with those of the rest of the world during a specific time period.
What is a Free Trade Agreement (FTA)?
A pact between two or more nations to reduce barriers to imports and exports among them, typically involving reduction or elimination of tariffs and quotas.
What is a Bilateral Trade Agreement?
A trade agreement between two countries that reduces trade barriers for certain goods.
What is a Multilateral Trade Agreement?
A trade agreement among three or more countries, reducing trade barriers for specific goods traded between member countries.
What is the World Trade Organization (WTO)?
An international organization established to supervise and liberalize world trade, replacing the General Agreement on Tariffs and Trade (GATT).
