Chapter 8 International Economics Basic Theory & Core Institutions Flashcards

A situation in which one state has a productive advantage over another in two (or more) goods, but trade can still be mutually beneficial due to the principle of comparative advantage.

A type of policy designed to prevent dumping by other states. Permitted by international law, anti-dumping policies constitute one sort of non-tariff barrier (NTB).

Tariffs that offset the price cuts offered by foreign suppliers below what they charge in their own markets (dumping).

A trade agreement formed between ASEAN members with the initial goal of eliminating tariffs between the six original members.

A policy by which governments raise interest rates or reduce government spending in an effort to discourage consumption and investment at home and, in so doing, reduce inflation and inflationary pressures.

The separation of a country from the world economy in an effort to protect its economy from the effects of the global market.

A summary of the international transactions of its residents, including individuals, households, private enterprises, and the government, with residents in the rest of the world during some fixed period of time, usually a quarter (three months) or a year.

One sort of investment transaction involving multiple currencies, in which banks headquartered in one country might extend loans to a foreign individual or enterprise.

The international system created in 1944 to encourage progressive trade liberalization and stable monetary relations between all the countries of the world. Although initial membership was fairly low due to Cold War tensions, membership in the resulting organizations steadily increased to include the vast majority of the world’s countries. The ITO, GATT, WTO, IMF, and World Bank were all created as a result of the Bretton Woods system.

One country has a comparative advantage over another in the production of a good if, in order to make one more unit of that good, it has to forego less of another good.

An IMF practice in which the IMF would lend foreign currency to a state running a deficit to allow that state to buy its own currency on international markets and, as a condition for receiving the loan, the IMF could prescribe policies for the receiving country to enact in its domestic economy to help solve economic issues and avoid future problems.

The purchase or sale of currency by a state government in international markets to maintain a constant exchange rate between that government’s currency and another currency.

A group of countries in which each has given up its respective national currency in favor of a common currency.

The current account consists of the country’s balance of trade in goods and services (the value of exports minus the value of imports), plus its income receipts such as the receipt of earnings from past investments abroad or the payment of such earnings to foreigners, and other transfers such as remittances that workers send out of the country or local residents receive from abroad.

A demand curve specifies the quantity of a good that consumers wish to purchase at different prices. Along with supply curves, demand curves can show the likely price of goods, including currencies, in international markets.