Free Trade and Restrictions on Free Trade

These flashcards cover essential terms related to free trade, its advantages and disadvantages, trade patterns, and the impact of trade blocs and tariffs.

Free Trade

The ability to trade goods and services between countries without barriers such as tariffs or quotas.

Comparative Advantage (CA)

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

Tariffs

Taxes imposed on imported goods to protect domestic industries and generate revenue.

Monetary Union

A group of countries that share a common currency and coordinate economic policy.

Trade Blocs

Groups of countries that agree to reduce or eliminate trade barriers among themselves.

Customs Union

A trade agreement where member countries remove tariffs on trade with each other and adopt a common external tariff.

Import Quota

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

Export Subsidy

A government policy to encourage export of goods by providing financial support to domestic producers.

Rising Income in Emerging Economies

Increased demand for imports and investment opportunities leading to shifts in global trade patterns.

Gravity Theory

The hypothesis that countries are more likely to trade with closer geographical neighbors.