International Economics Flashcards

Only 10 flashcards are shown at a time! Once you’ve mastered these 10 Economic terms, click the shuffle button below for 10 new terms. There are approximately 60 flashcards covering International Economics

J-Curve
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A graph showing the likely change in a nation’s current account balance over time following a depreciation of the nation’s currency. Called “J-curve” because in the short-run, the current account is likely to move down, into deficit, but in the long-run (once consumers at home and abroad become more responsive to the weaker currency), net exports will increase and the current account will move towards surplus.

J-Curve
Floating exchange rate
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When a currency’s price relative to other currencies is determined by the free interaction of supply and demand in international forex markets.

Floating exchange rate
Expenditure-reducing policies
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Measures a government may undertake to improve an imbalance in the current account. If a nation has a large current account deficit, a decrease in spending on imports move the current account towards surplus. Reducing overall spending in the economy (including on imports) by raising income taxes and reducing government spending (contractionary fiscal policies) can improve the trade balance.

Expenditure-reducing policies
Balance of Payments
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Measures all the monetary exchanges between one nation and all other nations. Includes the current account and the capital account.

Balance of Payments
Specialization
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The practice of allocating an individual’s, an organization’s or a nation’s resources towards the production of a good or a category of goods for which it has a relatively low opportunity cost. Improves the overall allocation of resources and allows individuals and, with trade, allows individuals or nations to consume beyond what they would be able to produce on their own.

Specialization
Globalization
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The emerging inter-connectedness of the world’s national economies and cultures

Globalization
Current account deficit
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When the value of a nation’s imports from abroad exceeds the value of the exports from that nation to the rest of the world. Also called a trade deficit.

Current account deficit
Multi-national Corporations

(MNC): A firm which operates in more than one country.

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Multi-national Corporations
Official reserves
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Foreign currencies held by a nation’s central bank, resulting from accumulations in the current account and the financial account in the nation’s balance of payments. To balance the two accounts in the balance of payments, a country’s official foreign exchange reserves measures the net effect of all the money flows from the other accounts.

Official reserves
Free Trade Agreement
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An agreement between two or more nations to reduce or eliminate barriers to trade across member states. Meant to achieve a more efficient allocation of resources between nations and a larger market for member nation’s exports, as well as a larger variety of goods for domestic consumers to enjoy.

Free Trade Agreement

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