International Economics: Trade Protection, Economic Integration, and Exchange Rates

Comprehensive vocabulary flashcards defining key trade protection concepts, forms of economic integration, and floating exchange rate systems.

Protectionism

A set of policies implemented by a government to restrict the flow of goods and services coming into a country from outside.

Tariff

A tax placed per unit on the price of imported goods and services, also known as an import duty.

Quota

A physical limit placed on the quantity of a particular good permitted to be imported into a country.

Subsidy

A payment per unit of output provided by the government to a specific domestic industry to lower production costs and boost production.

Administrative Barriers

Regulations and bureaucratic procedures that increase the costs, difficulty, and time required to import foreign goods and services, such as embargoes, licensing requirements, and product quality standards.

Infant (Sunrise) Industry

A newly established industry in its early stages of development that requires government trade protection until it achieves economies of scale and can compete with established foreign competitors.

Dumping

The practice of foreign firms selling products in another country's market at prices below their cost of production or below domestic market prices, often due to excess supply or subsidies.

Economically Least Developed Countries (ELDCs)

Low-income countries that face severe structural barriers to sustainable economic development.

Retaliation (Trade)

An argument against trade protection wherein trading partner nations respond to barriers by imposing their own retaliatory tariffs or trade restrictions.

Economic Integration

The process of countries becoming more economically unified and interdependent through agreements to reduce or remove trade and monetary barriers.

Preferential Trade Agreement (PTA)

A formal agreement between two or more countries to lower trade barriers on selected goods and services under special or favorable terms and conditions.

Bilateral Trade Agreement

A preferential trade agreement formed between two countries.

Multilateral Trade Agreement

A trade agreement involving three or more participating countries.

Trading Bloc

A group of countries that formally agree to reduce or eliminate trade barriers among themselves to encourage freer trade and economic cooperation.

Free Trade Area (FTA)

A trading bloc where member countries eliminate tariffs and quotas on trade between themselves, while each country maintains the autonomy to set its own individual trade policies toward non-member nations.

Customs Union

A form of trading bloc where member countries eliminate internal trade barriers among themselves and adopt a common external tariff or trade policy toward all non-member countries.

Common Market

A trading bloc in which members eliminate internal trade barriers, adopt a common external trade policy, and permit the completely free movement of factors of production (such as labor and capital) between member states.

Monetary Union

A deep level of economic integration in which members of a common market adopt a single shared currency and establish a common central bank responsible for a unified monetary policy.

Exchange Rate

The value of one national currency expressed in terms of another currency.

Floating Exchange Rate System

An exchange rate regime where the price of a currency is determined entirely by the market forces of demand and supply without government or central bank intervention.

Currency Appreciation

An increase in the value of a currency in terms of another under a floating exchange rate system, caused by an outward shift in demand ($\uparrow D$) or an inward shift in supply ($\downarrow S$).

Currency Depreciation

A decrease in the value of a currency in terms of another under a floating exchange rate system, caused by an inward shift in demand ($\downarrow D$) or an outward shift in supply ($\uparrow S$).

TIPS (Determinants of Exchange Rates)

A mnemonic representing the primary factors shifting currency demand and supply: Taste and preferences, Incomes, Price levels (inflation), and Speculation (along with Interest rates).

ELITE (Consequences of Exchange Rates)

A mnemonic representing the macroeconomic areas impacted by currency fluctuations: Economic growth, Living standards, Inflation, Trade balance (net exports), and Employment.