international economy

+ peeranian definitions

Absolute advantage

The ability of one country to produce a good using fewer resources than another country.

Autarky

Economic independence or self-sufficiency.

Foreign exchange

Collective term for the currencies of other countries.

Free trade

The absence of government intervention in international trade.

Protectionism

The process of preventing the free flow of products between countries through government policies such as quotas, subsidies and tariffs.

Factor endowments

The quality and quantity of factors of production, or resources, that a country owns i.e. land, labor, capital, and entrepreneurship.

Specialization

The decision of a firm or country to concentrate on producing one or a few goods and services efficiently, usually at a lower cost than another firm or country.

Trade protection

Government intervention in trade through the imposition of trade barriers such as quota and tariffs.

Tariff

A tax imposed on imports by a government.

Quota

A legal limit on the amount of goods that can be imported over a particular period of time. Also assumes domestic nation can fulfill missing supply

Administrative barriers

The technical and legal barriers that a country can place on imports by impeding the free flow of goods so as to protect domestic industries.

Dumping

The practice of selling a good in international markets at prices below production costs to gain a competitive advantage.

Infant industry

A new domestic industry that has not had time to establish itself and achieve efficiencies in production and therefore unable to compete with more mature international firms.

Comparative advantage

The situation in which one country can produce a good with a relatively lower opportunity cost than another country.

Exchange rate

The value or price of one currency in terms of another currency.

logistics

the process and factors associated with the efficient movement and transportation of resources across borders

Objectives of free trade

maximizing economic efficiency, lowering global prices, enhancing competition

International trade

act of exchanging, buying, and selling products between sovereign nations across international borders

Objective of international trade

accessing foreign goods, expanding market share, generating national revenue

primary sector

part of the economy that extracts natural resources and cultivates agriculture

secondary sector

part of the economy responsible for manufacturing and assembly

tertiary sector

low and high skilled services

exchanges made during international trade

goods, FOPs, remittances, entrepreneurship, land

commodity

raw materials that can be used to produce other finished goods, final or intermediate

arbitrage

buying an asset for a low price and selling it at a high price

most traded commodities

crude oil, metals, agriculture

limits of comparative advantage theory

Countries produce more than two goods, so the opportunity cost is difficult to collect, and it ignores shipping costs, ignores structural economic changes, and encourages excessive specialization

Why do economies restrict trade

protecting domestic jobs, fairness, government revenue, national defense, protecting infant industries, promoting exports

subsidies

forms of financial assistance to domestic firms to increase domestic revenue and consumption

export subsidies

is a financial benefit or policy provided by a government to encourage domestic companies to sell goods and services in international markets rather than domestically

administrative barriers

application of standards and regulations imposed on foreign firms

Examples of administrative barriers

embargoes, exchange controls, costs of meeting standards, time lags