chapter 18

Flashcards about International Trade concepts.

Gains from Trade

Specialization and Comparative Advantage allow countries to produce what they're best at and trade for the rest.

Free Trade

No barriers; goods and services flow freely across borders.

Protectionism

Government policies restrict imports to protect domestic industries.

Tariffs

Taxes on imported goods.

Protect infant industries

The idea to shield new industries from foreign competition.

National security (as an argument for protectionism)

Ensuring a country can produce essential goods during crises.

Protect domestic jobs

Safeguarding employment in domestic industries.

Prevent dumping

Selling goods abroad at below-cost prices.

Correct trade imbalances

Addressing imbalances in a country's trade.

Trade deficits

A situation where a country imports more than it exports.

Opportunity cost

The cost of the next best alternative use of money, time, or resources when one choice is made rather than another

Imports

When the price falls, Domestic consumption increases, and Domestic production decreases

Exports

When the Price rises, Domestic consumption decreases, and Domestic production increases

Tariffs on imports

Raises price of imported goods, Increases domestic production, and Decreases domestic consumption

Consumer surplus

Area below demand curve, above price

Producer surplus

Area above supply curve, below price

Government revenue

Tariff × quantity imported

Deadweight loss

Two triangles lost due to inefficiency from tariffs

Appreciation

A currency gains value relative to another

Depreciation

A currency loses value relative to another

Appreciation: Impacts

Imports become cheaper, Exports become more expensive → can reduce export demand

Depreciation: Impacts

Imports become more expensive, Exports become cheaper → increases export demand

Interest Rates↑ : Effect on Currency Value

Appreciation (more capital inflow)

Inflation↑ : Effect on Currency Value

Depreciation (reduced buying power)

Income↑: Effect on Currency Value

Depreciation (more imports)