AP Macro Unit 3

studied byStudied by 4 people
0.0(0)
Get a hint
Hint

comparative advantage

1 / 44

flashcard set

Earn XP

Description and Tags

International Trade

45 Terms

1

comparative advantage

a person/country can produce a product at a lower opportunity cost than other people/countries, basis of specialization and trade, coined by David Ricardo

New cards
2

absolute advantage

a person/country is the most efficient producer of a product, meaning they produce more output with given resources, coined by Adam Smith

New cards
3

opportunity cost ratio

equivalency showing the number of units of 2 products that can be produced with the same resources

New cards
4

principle of comparative advantage

a person/nation will benefit by specializing in goods with lower opportunity costs than its trading partner, then trade for other desired products

New cards
5

terms of trade

rate at which units of one product can be exchanged for another, exchange ratio

New cards
6

trading possibilities line

shows amounts of 2 products an economy can obtain by specializing in one product and trading to obtain the other product

New cards
7

world price

international price of good/service, determined by world supply and demand

New cards
8

domestic price

price of good/service in a country, determined by domestic supply and demand

New cards
9

export supply curve

upsloping curve showing amount of product domestic firms will export at each world price above domestic price

New cards
10

import demand curve

downsloping curve showing amount of a product an economy will import at each world price below domestic price

New cards
11

equilibrium world price

price of internationally traded product when quantity demanded by importers equals quantity supplied by exporters

New cards
12

tariffs

tax imposed by a nation on an imported good

New cards
13

revenue tariff

tariff designed to generate income for the federal government

New cards
14

protective tariff

tariff imposed to shield domestic producers from competition of foreign producers

New cards
15

import quota

limit on quantity of a good that may be imported for a period of time

New cards
16

voluntary export restriction

voluntary restrictions by nations/firms on their own exports to a foreign nation to avoid enactment of trade barriers by the foreign nation

New cards
17

export subsidy

govt payment to a domestic producer to enable the firm to reduce the price of products to foreign buyers, so they can increase exports

New cards
18

dumping

sale of a product in a foreign country at very low prices below domestic price, attempt to collapse domestic competitors and gain a monopoly

New cards
19

General Agreement on Tariffs & Trade (GATT)

international agreement to eliminate import quotas, reduce tariffs, and give each other equal treatment

New cards
20

World Trade Organization (WTO)

oversees provisions of trade agreements, resolves disputes, holds negotiations

New cards
21

European Union (EU)

eliminated tariffs and quotas among european nations, established common economic policies

New cards
22

eurozone

established euro as common currency among EU members

New cards
23

NAFTA

established free trade zone between US, Canada, and Mexico

New cards
24

Trade Adjustment Assistance Act

US law to provide economic and health support to workers displaced by imports or relocations of US firms

New cards
25

offshoring

shifting work of domestic workers to foreign workers to save money

New cards
26

balance of payments

  • summary of all financial transactions that take place between individuals, firms, and govts of different nations in one year

  • should amount to zero between current and capital & financial account

New cards
27

current account

records exports and imports of goods/services, net investment income, and net transfers

New cards
28

net investment income

difference between foreign payments to US for services of US capital abroad, and US payments to foreign capital

New cards
29

net transfers

exports of goodwill (foreign aid) and imports of ‘thank you notes’

New cards
30

balance on goods and services

records exports and imports of goods/services minus imports of goods/services in a year

New cards
31

balance on current account

records exports minus imports plus net investment income and net transfers, adds all transactions on current account

New cards
32

capital & financial account

records debt forgiveness and purchases of assets to and from foreign nations

New cards
33

balance of capital & financial account

sum of capital account balance and financial account balance

New cards
34

flexible (floating) exchange rate system

rate of exchange determined by international supply/demand, can rise and fall, no govt intervention

New cards
35

fixed exchange system

govt determines exchange rates, adjusts economy to maintain rates, no rising and falling

New cards
36

purchasing power parity theory

if countries have flexible exchange rates then the exchange rate of nations’ currencies will adjust to equal each other

New cards
37

speculation

people buy and sell currencies to resell and repurchase for profit

New cards
38

official reserves

foreign currencies owned by a central bank of a nation, includes foreign bonds

New cards
39

foreign exchange (FX) reserves

stockpiles of foreign currency by central bank, obtained when selling local currency

New cards
40

sterilization

changes in reserve ratios to offset changes in domestic money supply

New cards
41

exchange controls

restrictions on quantity of foreign currency demanded by citizens

New cards
42

balance of payments deficit

decline in a country’s FX reserves

New cards
43

balance of payments surplus

net increase in a country’s FX reserves

New cards
44

currency interventions

govt buying and selling own or foreign currencies to alter international exchange rates

New cards
45

managed floating exchange rate

exchange rate allowed to change with supply & demand, but sometimes altered by govt selling/buying currencies

New cards

Explore top notes

note Note
studied byStudied by 14 people
Updated ... ago
5.0 Stars(2)
note Note
studied byStudied by 35 people
Updated ... ago
4.0 Stars(1)
note Note
studied byStudied by 19 people
Updated ... ago
5.0 Stars(1)
note Note
studied byStudied by 55 people
Updated ... ago
5.0 Stars(4)
note Note
studied byStudied by 5 people
Updated ... ago
5.0 Stars(1)
note Note
studied byStudied by 7 people
Updated ... ago
5.0 Stars(1)
note Note
studied byStudied by 42 people
Updated ... ago
4.0 Stars(1)
note Note
studied byStudied by 138 people
Updated ... ago
5.0 Stars(2)

Explore top flashcards

flashcards Flashcard43 terms
studied byStudied by 19 people
Updated ... ago
4.0 Stars(1)
flashcards Flashcard85 terms
studied byStudied by 28 people
Updated ... ago
5.0 Stars(2)
flashcards Flashcard107 terms
studied byStudied by 19 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard33 terms
studied byStudied by 9 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard40 terms
studied byStudied by 3 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard22 terms
studied byStudied by 1 person
Updated ... ago
5.0 Stars(1)
flashcards Flashcard25 terms
studied byStudied by 113 people
Updated ... ago
5.0 Stars(2)
flashcards Flashcard63 terms
studied byStudied by 18 people
Updated ... ago
5.0 Stars(1)