2.7 International Trade & Capital Flows

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22 Terms

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GDP
sum of all goods/services made in country
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GNP
sum of all goods/services made by country’s citizens, both domestically and abroad
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absolute advantage
when one can produce g/s at lower cost or w/ less resources
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competitive advantage
when one can produce g/s at a lower opportunity cost
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increase
tariffs, quotas and export subsidies ___________ producer surplus, price and domestic production
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decrease
tariffs, quotas and export subsidies ___________ consumer surplus and domestic consumption
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tariff
increases producer surplus, govt revenue, price and domestic production and decreases consumer surplus, domestic consumption and trade
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quota
increases producer surplus, price and domestic production and decreases consumer surplus, domestic consumption and imports
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export subsidy
increases producer surplus, govt spending, price domestic production and exports and decreases consumer surplus, govt revenue, domestic consumptions and national welfare
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free trade area
no barriers to trade among members
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customs union
free trade area w/ common trade policy against non-members
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common market
customs union w/ free movement of production factors among members
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economic union
common market w/ additional economic integrations
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monetary union
economic union w/ common currency
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balance of payments
summary of country’s economic transactions
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current, capital and financial
3 types of accounts in a country’s balance of payments
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current account
type of balance of payments account that incl. merchandise trade, services, income receipts and unilateral transfers
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capital account
type of balance of payments account that incl. capital transfers and sales of non-financial assets
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financial account
type of balance of payments account that incl. financial assets abroad and foreign-owned financial assets
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IMF
organization that supports international trade, open payments system and stable FX rates; can lend to its members
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World Bank
organization that helps developing countries fight poverty and grow economically
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WTO
organization that is the legal & institutional foundation of the international trade system