economics concepts and choices chapter 17

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Economic interdependence

a situation in which producers in one nation depend on others to provide goods and services they do not produce

Specialization

a situation that occurs when individuals or businesses produce a narrow range of products

free-trade zone

a specific region in which trade between nations takes place without protective tariffs

balance of payments

a record of all the transactions that occurred between the individuals, businesses, and government units of one nation and those of the rest of the world

flexible rate of exchange

a system in which the exchange rate for currency changes as supply and demand for the currency changes

Revenue Tariff

a tax levied on imports specifically to raise money

protective Tariff

a tax on imported goods to protect domestic goods

Comparative Advantage

a trading nation's ability to produce something at a lower opportunity cost than that of another trading nation

customs union

an agreement that abolishes trade barriers among its members and establishes unifroms tariffs for non-members

European Union

an economic and political union of Eropean nations established in 1993

trade barrier

any law that limits free trade between nations

balance of trade

the difference between the value of its imports and exports

NAFTA

North American Free Trade Association, designed to ensure trade without barriers between Canada, Mexico, and the US

World Trade Organization

WTO, a group of nations that adhere to the policies of the General Agreement on Tariffs and Trade

voluntary export restraint (VER)

a country's self-imposed restriction on exports

Tariff

a fee charged for goods brought into one country from another

cartel

a group of producers who regulate the production, pricing, and marketing of a particular product

embargo

a law that cuts off trade with a specific country

quota

a limit on the amount of a product that can be imported

trade-weighted value of the dollar

a measure of the international value of the dollar

trade surplus

exports more than it imports

Imports

good and services produced in one country and purchased by another

Exports

goods and services produced in one country and sold to other countries

trade deficit

imports more than it exports

Infant Industries

new industries that are often unable to compete against larger, more established competitors

Law of comparative advantage

states that countries gain when they produce items they are most efficient at producing and are at the lowest opportunity cost

trade war

succession of increasing trade barriers between nations

OPEC

the Organization of Petroleum Exporting Countries, cartel that's product is oil

Absolute advantage

the ability of one trading nation to make a product more effeciently than another trading nation

foreign exchange market

the currencies of different countries are bought and sold

fixed rate of exchange

the currency of one nation is fixed, or constant, in relation to other currencies

euro

the currency of the European Union

foreign exchange rate

the price of a currency in the currencies of other nations

Dumping

the sale of a product in another country at a price lower than in the home market

Protectionism

the use of trade barriers between nations to protect domestic industries


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