economics concepts and choices chapter 17
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
