ch.30Net Exports and International Finance

Flashcards covering key terms and concepts related to net exports and international finance, essential for understanding international economics.

Net Exports

The value of a country's total exports minus its total imports.

Trade Deficit

A situation where a country's imports exceed its exports.

Trade Surplus

A situation where a country's exports exceed its imports.

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

Exchange Rate

The price of one currency in terms of another currency.

Tariff

A tax imposed on imported goods and services.

Quota

A limit on the quantity of a specific good that can be imported.

Balance of Payments

An accounting statement that summarizes all transactions made between entities in a country and the rest of the world.

Current Account

A component of the balance of payments that includes the trade balance, net primary income, and net cash transfers.

Capital Account

A component of the balance of payments that includes transactions involving the purchase and sale of assets.

Free Trade Agreement

A pact between two or more nations to reduce or eliminate trade barriers.

Protectionism

The economic policy of restraining trade between nations through tariffs and other regulations.

Managed Float

A type of exchange rate regime where the currency value is allowed to fluctuate according to market forces, but government can intervene to stabilize it.

Fixed Exchange Rate

A system in which a currency's value is tied to another major currency or a basket of currencies.

Free-Floating System

A currency system where the value is determined by market forces without direct government or central bank intervention.

International Trade Effect

The effect of changes in the price level on net exports, which in turn affects aggregate demand.

Multiplier Effect

The amplification of initial changes in spending leading to larger changes in national income.

Economic Growth

An increase in the production of goods and services in an economy over time.

North American Free Trade Agreement (NAFTA)

An agreement between Canada, Mexico, and the United States aimed at reducing trade barriers.