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Flashcards in International Trade Definitions Deck (21)
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1

Absolute advantage

Country can produce more of a product than another country with a given level of resources

2

Comparative advantage

When a country can produce a good at a lower opportunity cost than another country

3

Direct investment

Investment in physical capital- there's a degree of ownership/control

4

Portfolio investment

Financial investment i.e. purchase and sales of shares and bonds

5

Infrastructure

Essential facilities/capital goods and services that increases efficiency of economic activity. It is usually supplied by the government

6

Exchange Rate

The value of a currency in terms of another

7

Fixed exchange rate

A currency's value fixed against the value of another currency

8

Managed float

Periodic intervention by the Central Bank in order to influence the Exchange Rate

9

Depreciation

The fall in the value of a currency in a floating exchange system

10

Preferential Trade Agreements

An agreement between 2 or more countries to lower barriers between each other on particular products

11

Bilateral trade agreements

Trade between two countries which aims to lower trade barriers

12

Customs union

Form of economic integration where member countries agree to liberalize trade amongst themselves and adopt a common external tariff

13

Common market

A trading bloc where member countries eliminate all trade barriers, adopt a common policy towards non-member states and have a free flow of factors of production

14

Monetary union

A common market but also shares a common currency

15

Terms of trade

The ratio of a country's average price of exports to the country's average price of imports

16

Current Account

A measure of the flow of funds from trade in goods and services + net income flows + net transfers of money

17

Financial Account

The net balance arising from the net flows of foreign direct investment and flows of portfolio investment and change in reserve assets

18

Diversification

A strategy to increase the variety of goods and services produced in order to avoid over-specialisation

19

Quota

A physical limit on the number/value of a good that can be imported into the country

20

Subsidies

The sums of money given by government to firms to lower their costs of production

21

Tariff

A tax on imports