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Flashcards in International Trade Deck (15)
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1
Q

Trade

A

The voluntary exchange of goods and services

2
Q

Absolute advantage

A

Ability to make good or service with FEWER INPUTS

3
Q

Comparative Advantage

A

lower opportunity costs

4
Q

Sources of comparative advantage

A
  1. varied inputs from one nation to the next
  2. differences in government services and regulations
  3. investments in technology
5
Q

Why do people trade?

A

product differentiation

arbitrage (costs)

6
Q

The World Price

A

the price that prevails in the world market for that good

7
Q

What happens if your domestic price is lower than the world price?

A

You become an exporter of the good

8
Q

What happens if your domestic price is higher than the world price?

A

You become an importer of the good

9
Q

Unemployment in the short run

A

people’s jobs are displaced

companies shut down

10
Q

Unemployment in the long run

A

displaced workers find jobs with companies that are more efficient

11
Q

Tariff

A

tax on goods produces abroad and sold domestically

12
Q

Who does a tariff hurt and help?

A

Hurts: consumers

Helps: domestic industry

13
Q

Import quota

A

Limit on the quantity of a good that can be produced abroad and sold domestically

Domestic price gets driven above the world price

14
Q

NAFTA

A

North American Free Trade Agreement

Removes trade barriers between the US, Mexico, and Canada

Ex: can move Mexican pots across the American border without taxes

15
Q

GATT

A

General Agreement on Tariffs and Trade

Promotes free trade, reduces the tariff rate

Now called the WTO (World Trade Organization)