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

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
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
Foreign Direct Investment (FDI)
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Investment in factors of production abroad by multi-national corporations.

Foreign Direct Investment (FDI)
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
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
Exchange rate
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The price of one currency in terms expressed in terms of another currency, determined in the forex market.

Exchange rate
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 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
Speculation
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The buying and selling of currencies or other assets based on the expectation of future changes in exchange rates or prices. Speculation is a major determinant of the exchange rate of the world’s currencies.

Speculation
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

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