Trade

Ncea Level 2 - Economics

Local domestic market

Refers to other businesses in the same region or location within a country that a business competes with

Offshoring

The relocation of parts of a business from one country to another

International Trade

Occurs across national borders and could involve different currencies

Free trade

Where trade between countries occurs without government intervention

Comparative advantage

A theory that states that a country should specialise in the rpoduction of those goods that is relatively more efficient at producing (in terms of cost and/or resources used)

Protectionism

Government measures that impede or inhibit the free flow of good s and services between nations

Strategic (essential industry)

Argument is based on the idea that certain industries are regarded as vital to a nation at war

Employment argument

The entry of cheaper imported products may cause firms to close down with workers losing their jobs.

Embargo

A complete ban on trade with particular country as an adjunct to the policies pursued by the government

Subsidy

A payment made by the government to a firm, which in effect lowers production costs

Regulations

A way to control imports

Tariff

A tax placed on imports that raises the price of imported goods thereby making locally made products relatively more price competitive

Foreign exchange market

The international market in which transactions are conducted to effect the exchange of one national currency for another

Exchange rate

The price at which one currency exchanges for another

Flexible/floating exchange rate

The price of currencies, in terms of each other, are determined in the market for foreign exchange

Clean float

When the government does not directly intervene to influence the exchange rate

A dirty float

when the government acts to influence the exchange rate

The Balance of Payments

The account that records all the transactions of one country with the rest of the world. Includes the current account, the capital account and the financial account

The current account

The balance on goods, the balance on services, the balance on income, the balance of current transfers

The balance on goods

the export of goods minus import of goods

The balance on services

the export of services minus the import of services

The balance on income

dividends, interest and profit transmitted between countries

The balance of current transfers

Includes gifts of goods, services, foreign aid and money sent to relatives and friends overseas

The capital account

Covers transactions in capital transfers and acquisition disosal of non produced, non financial assets

The financial account

Records transactions involving a country’s claims on assets, and liabilities to the rest of the world