International Trade

Tariff

tax on imports

Specific tariff

money amount per unit of import

Ad valorem tariff

percentage of estimated market value of the good when reached importing country

GATT

(General agreement on tariffs and trade) promote free trade by reducing tariffs and other trade barriers. operated by rounds aka the Kennedy Round

WTO

(World trade organization) replacement for GATT. permanent organization that regulates international trade enforces trade agreements and resolves disputes between countries. covers goods services and intelectual property. fair trade

Small country

changes in tariff does not affect the world price

Large country

changes in tariffs influence the world price. sometimes when tariff is small enough it benefits

Producer surplus

the amount producers gain from being able to sell at the maret price

Consumer surplus

the amount consumers gain from being able to buy at the going market price

One-dollar One-vote

every dollar of gain or loss is just as important no matter who the gainers or losers are

Consumption effect

the loss of consumer surplus based on the tariff

Production effect

extra cost of producing goods domestically that could have been imported more cheaply

Monospony power

the ability to influence the world price of a good (mono = one buyer/dominant buyer)

Nationally optimal tariff

the best tariff. the tariff that creates the largest net gain for the country imposing it

Terms-of-trade effect

how many imports can a country get for one unit of exports

Deadweight loss

no one gains. typically in the side traingles on a graph

Brady bonds

dollar dominated bonds (government debt

Seigniorage

profit government makes by printing money. value of money issued - cost of producing it

Monetary policy description

the actions a central bank takes to control the supply of money and interest rates in an economy

Crisis of confidence

when people lose trust in their currency economy or government

John law 

economist who introduced paper money and encouraged investment leading to speculation and the the Mississippi bubble (financial collapse)

Bretton Woods system

established a fixed exchange rate - every country was tied to the US dollar because it was the strongest dollar after WWII and the same value as gold. the US dollar was backed up with gold and for decades provided stability untill the US used too much of it through wars (vietnam war), and expansion of reserves. this lead to lost of trust, countries demanding gold instead and they ran out. Nixon ended this and no longer converted the dollar into gold moving to a floating exchange rate.

current account

goods and services currently happening (quick and easy)

financial account 

investment and bonds 

Capital inflows

funds coming into a country from foreign investors. if you tax these it will lose its attractiveness bc investors dont want to invest in something that is taxed

fiscal cost

the price the government pays for a decision 

currency substitution 

when people in a country start using a foreign currency instead of their own domestic currency 

currency board

money you can always exchange 1:1 for a foreign currency, fully backed, but no independent printing allowed

peg

(fixed exchange rate) when a country sets its currency value to another currency (most likely USD) at a fixed rate

Sovereign 

a state or government that has full control over its territory, population, and decisions (money, laws, and policies)

devaluation

reducing the value of the countrys currency

appreciation

strengthening the countrys currency

Asset substitution

results from risk and return considerations about domestic and foreign assets