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

Free trade area
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An agreement between nations to reduce or remove tariffs and quotas on all goods traded between the member states. Nations can maintain their own external barriers to trade, thus this is a lower level of economic integration than a customs union, but it represents a higher level of integration than a preferential trade area.

Free trade area
Dumping
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The practice of producers in one nation selling their output at a price lower than their costs of production in another nation. Considered a justification for protectionism by the World Trade Organization.

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

Free Trade
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
Free market economy
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An economic system in which resources are allocated purely by the forces of demand, supply and the price mechanism. The government has no influence over what is produced, how it is produced and for whom.

Free market economy
Appreciation
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An increase in the value of one currency relative to another, resulting from an increase in demand for or a decrease in supply of the currency on the foreign exchange market.

Appreciation
Deterioration in terms of trade
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Occurs when the price of a nation’s exports decreases relative to the price of its imports. May lead to an improvement in the current account balance if demand for imports is elastic relative to export demand, or a worsening in the current account balance if import demand is relatively inelastic.

Deterioration in terms of trade
Marshall-Lerner Condition
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Determines how a depreciation in a currency’s exchange rate will affect the nation’s current account balance. If the combined price elasticities of demand for exports and imports is greater than one (elastic), then a depreciation of the currency will move the current account towards surplus. But if demand for exports and imports is inelastic, a weaker currency will move the current account towards deficit.

Marshall-Lerner Condition
Quota
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A physical limit on the quantity of a good produced in a foreign country allowed to be imported. Meant to restrict imports, allowing domestic producers to sell a greater quantity on the domestic market.

Quota
Customs union
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A free trade agreement under which member nations agree to remove all protectionist measures (tariffs, quotas, etc.) between member states, but maintain common external tariffs on imports from non-member states.

Customs union

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