Macroeconomics - chapter 31 Comparative Advantage and the Open Economy

Flashcards for reviewing key concepts related to comparative advantage, trade, and international trade organizations.

Trade deficit

When a country imports more than it exports.

Trade surplus

When a country exports more than it imports.

Comparative advantage

The ability to produce a good or service at a lower opportunity cost than other producers.

Dumping

Selling a good or service abroad below the price charged in the home market.

Quotas

A limit on the quantity of an imported good.

Tariffs

A tax on an imported good.

World Trade Organization (WTO)

Regulates and facilitates international trade.

USMCA (United States-Mexico-Canada Agreement)

Successor to NAFTA (North American Free Trade Agreement)

CAFTA-DR (Central American-Dominican Republic Free Trade Agreement)

US, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua

Benefits of trade

Specialization

increase consumption possibilities

Higher standard of living

sharing of ideas