International Economics Flashcards – The Economics Classroom

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

Infant Industry
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An industry that is emerging in a less developed country, but which has not achieved the economies of scale and other efficiencies that allow it to compete with larger producers in more developed countries. Sometimes used as a justification for protectionist policies.

Infant Industry
Trade diversion
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When a free trade agreement diverts trade from a low-cost that is not involved in the agreement country to a higher cost country that is involved. If trade diversion occurs, a free trade agreement may lead to an overall loss of efficiency in resource allocation in the world.

Trade diversion
Multi-national Corporations

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

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Multi-national Corporations
Indebtedness
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When a country owes money to lenders, generally foreigners, requiring a large percentage of any tax revenues collected to go towards servicing the national debt. Presents an obstacle to economic development since poor countries find they have little money left over for the provision of public goods to citizens.

Indebtedness
Expenditure-switching policies
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Measures undertaken by a government to reduce a deficit in the country’s current account balance. Involve increased barriers to trade (tariffs, quotas or protectionist subsidies) aimed at switching the expenditures of domestic consumers from imported goods and services to domestically produced goods and services.

Expenditure-switching policies
Terms of Trade
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The ratio of an index of a nation’s export prices to its import prices. An improvement in the terms of trade means export prices have risen relative to import prices. A worsening means import prices have risen relative to export prices.

Terms of Trade
Current account
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Measures the balance of trade in goods and services and the flow of income between one nation and all other nations. It also records monetary gifts or grants that flow into our out of a country.

Current account
Voluntary Export Restraints
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(VER): Limits on exports agreed on by the government or the producers in one nation meant to help producers of particular products in another nation.

Voluntary Export Restraints
Import substitution
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A strategy for economic growth and development focused on producing goods for the domestic market to replace the goods that consumers may have bought from foreign firms previously. Requires the use of protectionism to keep foreign imports out of the domestic market. Also known as “inward-oriented growth strategy”.

Import substitution
Managed exchange rate
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When a government or central bank takes action to manage or fix the value of its currency relative to another currency on the forex market.

Managed exchange rate

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