Ch 19 - International Trade and Finance

Intervention

involves coordinated buying and selling of currencies in order to adjust their equilibrium values determined by supply and demand.

Life quota

tariffs raise the domestic price of goods and lowers the amount bought and sold.

Comparative advantage

suggests that free trade allows nations to consume more goods and services than if trade was restricted.

Depreciation

The decrease of the value of a currency in terms of another currency.

exchange rates

The ________ are impacted by the relative level of income and the relative level of prices in a nation.

Appreciation

The increase of the value of a currency in terms of another country.

Trade restrictions

are bad for consumers since they raise prices and limit their choices

Monetary and fiscal policy

can be used to fight inflation or recession

supply curve

for dollars reflects how many dollars are available in exchange for euros, it is upward sloping.

Official reserves

governments holdings of foreign currencies.

Net Exports

when a nations balance of trade is equal to its exports minus imports.

stimulatory effect

will be spent overseas, and exports will fall because of the inflation resulting from the increase in the money supply.

Net transfers

Money our government and citizens send as gifts or aid to foreigners mius how much foreigners send to us in gifts and aid.

Net Investment income

amount US citizen earns as interest and dividends from abroad minus how much was paid to foreigners in interest and dividends.

import quota

is a limit on the amount of a product that can be imported.

Managed float

Managed float: the current system for determining international exchange rates

Arcane rules and regulations

are often developed with no other purpose in mind than to discourage competition.

Gold standard

kept exchange rates between countries fixed, a unit of currency that is equivalent to a stated amount of gold.

Balance of Payments

Current account + capital account + financial account.

expansionary monetary policy

stimulates the economy in the short run by increasing the quantity of output and putting upward pressure on prices.

Monetary and fiscal policy

are less than effective when the economy is more open as opposed to closed to foreign trade.

Exchange rates

The value of one countrys currency in terms of anothers.

Net Exports

when a nations balance of trade is equal to its exports minus imports

Trade deficit

When the balance of trade is negative

Trade Surplus

Excess of a nations exports over its imports

Infant Industry

Industries that are just getting started (baby steps)

Dumping

The practice of foreign products selling in the domestic market for less than it cost to produce it

An import quota

is a limit on the amount of a product that can be imported

Balance of payments

an accounting of the funds that flow into and out of a country comprised of a capital account, the current account, and the financial account

Trade restrictions

Quotas, Tariffs, and Licensing requirements

Balance of Payments

Current account + capital account + financial account

Exchange rates

The value of one countrys currency in terms of anothers

Appreciation

The increase of the value of a currency in terms of another country

Depreciation

the decrease of the value of a currency in terms of another currency

Net Investment income

amount US citizen earns as interest and dividends from abroad minus how much was paid to foreigners in interest and dividends

Net transfers

Money our government and citizens send as gifts or aid to foreigners mius how much foreigners send to us in gifts and aid

Official reserves

governments holdings of foreign currencies

Gold standard

kept exchange rates between countries fixed, a unit of currency that is equivalent to a stated amount of gold

Managed float

the current system for determining international exchange rates

Monetary and fiscal policy

can be used to fight inflation or recession