Term
| What is comparative advantage? |
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Definition
| the ability to produce a product relatively more efficiently or at a lower opportunity cost |
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Term
| What is absolute advantage? |
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Definition
| when a country can produce more of a product than another country |
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Term
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Definition
| when people produce things they do best and exchange those products for the things that other people do best |
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Term
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Definition
| tax placed on an imported good. tariffs and quotas are the main ways to restrict international trade. tariffs can protect jobs |
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Term
| What is a revenue tariff? |
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Definition
| a tariff placed on imported goods to raise revenue. If the tariff on imported mechanical pencils were 40 cents, the price of the imports would be 75 cents, or 25 cents less than the American made ones. As long asthe two products are identical, consumers would prefer the imported one because its iless expensive, so the tariff would raise revenue rather than protect domestic producers from foreign competition. |
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Term
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Definition
| a limit placed on the quantities of a product that can be imported |
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Term
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Definition
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Term
| What is the most favored nation clause? |
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Definition
| trade law allowing anotehr country to enjoy the same tariff reductions the Untied STates negotiates with any third country |
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Term
| What is the world trade organization? |
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Definition
| international agency that administers trade agreements, settles trade disputes between governments, organizes trade negotiations, and provides technical assistance and training for developing countries |
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Term
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Definition
| North American Free Trade Agreement--an agreement to liberalize free trade by reducing tariffs among three major trading partners: Canada, mexico,and the US |
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Term
| What is foreign exchange? |
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Definition
| various currencies used to conduct international trade |
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Term
| What is the key to trade? |
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Definition
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Term
| What is proof that interantional trade is beneficial? |
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Definition
| the volume of international trade over time and all around the world |
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Term
| The most frequent argument used to support trade barriers is that they ____. |
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Definition
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Term
| A quota imposed on foregin cars imported into the USA will _____. |
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Definition
| increase the price of domestic cars |
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Term
| Foreign exchange is necessary in international trade because:____. |
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Definition
| each country has its own monetary system and currency |
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Term
| When a European importer wants to buy American made products, the importer _____. |
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Definition
| buys dollars and drives the price of the dollar up |
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Term
| If the US dollar depreciates relative to the world currencies, what will be the effect on US exports? |
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Definition
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Term
| The index that shows the strength of American currency against a group of foreign currencies is the:_____. |
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Definition
| trade weighted value of the dollar |
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Term
| What is the price of one country currency described in terms of another country's currency called? |
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Definition
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Term
| What is the system under which the price of one currency is fixed in terms of another? |
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Definition
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Term
| What is a system under which forces of supply and demand establish the price of one country's currency in terms of another country's currency? |
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Definition
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Term
| Foreign currencies in international finance:____ |
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Definition
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Term
| What are the two types of tariffs? |
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Definition
| protective tariff and revenue tariff |
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Term
| What is a protective tariff? |
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Definition
| a tariff that is high enough to protect less efficient domestic industries |
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Term
| explain a revenue tariff. |
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Definition
| if the price to make a mechanical pencil in the US is $1. and the price to import the same pencil is 35 cents. If the tariff on the imported pencil were forty cents, the new price would be 75 cents which is still 25 cents less than the american made one so people will choose to buy the imported one because it is less expensive so the tariff would raise revenue rather than protect domestic producers from foreign compeition |
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Term
| What is the real purpose of a quota? |
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Definition
| to protect domestic industries and the jobs in those industries |
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Term
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Definition
| whenever the value of a country's imports exceeds the value of the exports |
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Term
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Definition
| whenever the value of its exports exceed the value of its imports |
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Term
| What happens when the dollar is strong? |
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Definition
| foreign goods become less costly and american exports become more costly for the rest of the world |
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Term
| What happens if the dollar is weak? |
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Definition
| foregin goods become more expensive |
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