Financial Planning 5.03 Vocab

Absolute advantage

The advantage achieved when a nation can produce a good or service at a lower cost than another nation

Balance of payments

The difference between all monies coming into and going out of a country

Balance of trade

The difference between the value of a nation’s exports and its imports

Comparative advantage

The advantage achieved by a nation from specializing in and producing goods and services at which it is most efficient, relative to another country.

Currency

The money that a country uses to buy and sell goods and services

Domestic trade

The buying and selling of goods and services within a country

European Union (EU)

An association of European countries with uniform trade rules that eliminated all barriers and restrictions on the movement of goods and services among member nations

Exporting

The process of selling goods and services to individuals, businesses, or governments in other countries

Exports

Goods and services sold by businesses and industries in one country to individuals, manufacturers, or governments in other countries

Foreign aid

The money that developed countries give to less developed countries to help with their economic development

Global trade

The buying and selling of goods and services among nations

Globalization

The rapid and unimpeded flow of capital, labor, and ideas across national borders

Gross domestic product

The final market value of the total output of all goods and services produced within a country’s geographic boundaries during a year’s time; expresses the dollar value of what is produced, not the volume of production

Importing

The process of buying goods and services from other nations

Imports

Goods and services bought from other nations

Inflation

A rapid rise in prices, usually occurring when demand exceeds supply

License

A permit to import or export goods and services

North American Free Trade Agreement (NAFTA)

An agreement among the United States, Canada, and Mexico eliminating all of their trade barriers

Product standards

Criteria for determining a product’s ability to meet specified guidelines or requirements

Protectionism

A government’s policy to protect domestic industries and businesses against foreign competition

Quota

A trade restriction that limits the quantity of goods that can move into or out of a country

Subsidy

A payment provided by a government to a domestic producer; the payment is given to support the production of a particular good or service

Tariff

A tax levied by a government on imports

Trade agreements

Agreements between nations that provide for favorable trade relations

Trade centers

Facilities located in most major cities throughout the world that assist exporters through the export process and share information about tariffs, product standards, and other regulations with importers

Trade deficit

An unfavorable balance of trade in which a nation’s imports are greater than its exports

Trade mission

A trip involving business executives and/or government officials who travel to a foreign country to promote trade

Trade surplus

A favorable balance of trade in which a nation’s exports are greater than its imports

Trade talks

Meetings among nations to discuss improving economic and trade relations

World Trade Organization (WTO)

A global organization that essentially sets the rules of trade among nations; administers trade agreements and handles trade disputes