ECON EXAM II- Chapter 6

  1. tariff
    tax imposed by gvmt on imports
  2. imports
    g&s bought domestically, produced in other countries
  3. exports
    g&s produced domestically, sold in other countries
  4. since 1950 exports and imports have been
    steadily increasing as a fraction of US GDP
  5. free trade
    trade between countries without restrictions
  6. VER (voluntary export restraint)
    agreement negotiated between two countries that places a good that can imported by one country from the other country
  7. barriers to trade
    tariffs, quotas, health/safety requirements
  8. globalization
    process where countries become more open to foreign trade & investment
  9. in international trade, a market perspective would say that a country exports its goods when its able to be the
    lease cost provider in world markets
  10. gvmts influence international market trade by providing
    export subsidies to their own firms or by imposing tax tariffs or quotas on foreign goods
  11. with downward slopping national demand curves and positively sloppling supply curve a country will
    choose not to trade internationally when the world price is equal to its autarkic price
  12. autarkic price
    price that would clear the domestic market in isolation from the rest of the world
  13. a country will decide to export a good if
    the world price is above its domestic autarkic price
  14. a country wil decided to import a good if
    the world price is below its domestic autarkic price
  15. in an ideal world that consisted of two countries then
    goods would be exported by the country with the lower autarkic price and imported by the country with the higher autarkic price
  16. trade will continue until
    world Qd matches world Qs, at the world market clearing price and all mutually beneficial trade have been exhausted
  17. the economist's story of trade according to comparative advantage is nothing more or less than the story of
    the invisible hand working through ideal markets
  18. the labor theory of value to basically focusing on
    (relative) differences in technology
  19. a country exports a good that has
    a lower opportunity cost at home than abroad in terms of production of the other good given up
  20. differences in autarkic prices may come from differences in
    relative abundance of factors of productio
  21. if per capita income is twice as high in country A than in country B then consumers in country A will
    • tend to have a relatively higher demand for goods that ppl consume more of if they are richer
    • have a higher autarkic price
  22. if markets were literally like the ideal market model, there would
    be no need for multinational firms
  23. to understand the presence of multinational firms we must acknowledge that
    world markets are less than ideally competitive
  24. transactions between subsidiaries of a multination firm may be influenced by
    differences in national tax structures
  25. because people have a strong sense of national identity we might have negative views of
    trading with hostile countries (north korea)
  26. introduce free trade to a country that was autarky, then in the exporting country, the price of the exportable good is __________ and in the importing country the price of the same good is likely to __________
    • likely to rise to the new world market clearing price
    • fall to the level of the level of the new world market clearing price
    • thus net sellers of the good in the exporting country are better off (net buyers are worse off)
    • in the importing country net sellers are worse off (net buyers are better off)
  27. in the ideal market model the winners
    win more than the losers lose, country as a whole is better off
  28. perspective one
    • - sees the world as an ideal system of markets
    • - no issues of power
    • - national boundaries are irrelevant
    • - issue: provision of property rights
  29. perspective two
    • - emerges from "political realism"
    • - in a global society there are no police forces
    • - centered on the notion that "power rules"
  30. perspective three
    • - based on international cooperation for the common global good
    • - attractive to europeans
    • - used for war on terrorism
  31. situations to focus on the ideal market model
    • 1. where international markets issues are totally independent of international relations....
    • 2. where the issues of ideal markets are more important than issues of other perspectives
Card Set
ECON EXAM II- Chapter 6