Trade and Economics Lecture Flashcards

This set of vocabulary flashcards covers the principles of global trade, including trade advantages, specific national data from 2014, and the impact of trade agreements.

NAFTA

A free-trade agreement that has increased trade flows between the United States, Canada, and Mexico.

China's Trade Status (2014)

Identified as the country the United States currently trades with the most and the largest global exporter in 2014 with exports at $22.6\%$ of GDP.

Factors Increasing World Trade

Trade agreements (like NAFTA, EU zone, CAFTA), unilateral reductions in restrictions (such as in India), and technological advancements in communication, logistics, and transportation.

Comparative Advantage

The smallest opportunity cost of producing a good.

Absolute Advantage

Occurs when a country can produce a unit of a good with the fewest resources or costs.

Autarky

The economic state of nations (such as US and JP) before trade occurs, representing self-sufficiency.

Terms of Trade

The acceptable ratio of trade between countries, such as how much Electronics ($E$) are exchanged for Steel ($S$).

Specialization

The strategy where countries focus on producing what has a lower opportunity cost, resulting in mutual prosperity for both nations.

US Export Data (2014)

The United States had exports totaling $9.3\%$ of GDP and imports totaling $13.5\%$ of GDP.

Germany Export Data (2014)

Germany had a high level of export activity, with exports accounting for $36.8\%$ of its GDP.

Hong Kong Export Ratio (2014)

A significant global exporter with exports reaching $188.2\%$ of its GDP.

Singapore Export Ratio (2014)

A major global exporter with exports accounting for $163.6\%$ of its GDP.

Opportunity Cost Example (Japan)

In the provided notes, Japan can give up $2S$ for $1E$, or obtain $1E$ from the United States for $1S$ through trade.

CA (Comparative Advantage) Opportunity Costs - US

Based on a maximum production of $8$ Steel or $4$ Electronics, the opportunity cost is $1E = 2S$ or $1S = 0.5E$.

CA (Comparative Advantage) Opportunity Costs - JP

Based on a maximum production of $4$ Steel or $8$ Electronics, the opportunity cost is $1E = 0.5S$ or $1S = 2E$.