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

Preferential trade agreement
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A free trade agreement in which member states agree to remove protectionist measures on certain goods or services traded between them. The lowest level of economic integration, since only particular goods are included in the agreement.

Preferential trade agreement
Net Export effect
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The fall in net exports resulting from a deficit-financed fiscal stimulus. When a government deficit spends, it will drive up domestic interest rates (see crwoding-out effect), causing the country’s currency to appreciate on the foreign exchange market. This reduces demand for the country’s exports, reducing the expansionary effect of the deficit financed government spending.

Net Export effect
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
Free Trade
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The exchange of goods and services between different countries undertaken without any government intervention.

Free Trade
Non-convertible currencies
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A barrier to economic development arising from a nation’s inability to convert its currency on foreign exchange markets, thus its inability to acquire the foreign capital it needs to achieve improvements in productivity, income and human welfare among its people.

Non-convertible currencies
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
Financial account
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Measures the flow of funds for investment in real assets (such as factories or office building) or financial assets (such as stocks and bonds) between a nation and the rest of the world.

Financial account
Exports
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The spending by foreigners on domestically produced goods and services. Counts as an injection into a nation’s circular flow of income.

Exports
Imports
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Spending on goods and services produced in foreign nations. Counts as a leakage from a nation’s circular flow of income.

Imports
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

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