Chapter 7 VocabChapter 8 VocabChapter 9 VocabChapter 10 VocabChapter 7- Textbook “Review”Chapter 8- Textbook “Review”Chapter 9- Textbook “Review”Chapter 10- Textbook “Review”INR 2002 Exam 3 Vocab and Chapter ReviewsChapter 7 VocabComparative advantage- The ability of a country or firm to produce a particular good or service more efficiently than other goods or services, such that its resourcesare most efficiently employed in this activity. The comparison is to the efficiency of other economic activities the actor might undertake, not to the efficiency of other countries or firms.Absolute Advantage- The ability of a country or firm to produce more of a particular good or service than other countries or firms using the same amount of effort and resources.Heckscher-Ohlin trade theory- The theory that a country will export goods that makes intensive use of the factors of production in which it is well endowed. Thus, a labor-rich country will export goods that make intensive use of labor.Protectionism- The imposition of barriers to restrict imports. Commonly used protectionist devices include tariffs, quantitative restrictions (quotas), and other non-tariff barriers.Trade Barrier- Any government limitation on the international exchange of goods. Examples include tariffs, quantitative restrictions (quotas), import licenses, requirements that governments only buy domestically produced goods, and health and safety standards that discriminate against foreign goods.Quantitive Restrictions (Quotas)- Quantitative limits placed on the import of a particular good.Nontariff barriers to trade- Obstacles to imports other than tariffs (trade taxes). Examples include restrictions on the number of products that can be imported (Quantitive restrictions, or quotas); regulations that favor domestic over imported products; and other measures that discriminate against foreign goods or services. Stolper-Samuelson theorem- The theory that protection benefits the scarce factor of production. This view flows from the Heckscher-Ohlin approach; if a country imports goods that make intensive use of its scarce factor, them limiting import willhelp that factor. So in a labor-scarce country, labor benefits from protection and loses from trade liberalization.Ricardo-Viner (specific-factors) model- A model of trade relations that emphasizes the sector in which factors of production are employed, rather than the nature of the factor itself. This differentiates it from the Heckscher-Ohlin approach, for which the nature of the factor- labor, land, capital-is the principal consideration.Reciprocity- In international trade relations, a mutual agreement to lower tariffs and other barriers to trade. Reciprocity involves an implicit or explicit arrangement for one government to exchange trade policy concessions with another. Most Favored Nation (MFN) Status- A status established by most modern trade agreements guaranteeing that the signatories will extend to each other any favorable trading terms offered in agreements with third parties.World Trade Organization (WTO)- An institution created in 1995 to succeed the GATT and to govern international trade relations. The WTO encourages policies and the multilateral reduction of barriers of trade, and it oversees the resolution of tradedisputes.General Agreement on Tariffs and Trade (GATT)- An international institution created in 1948 in which member countries committed to reduce barriers to trade and to provide similar trading conditions to all other members. In 1995, the GATT was replaced by the World Trade Organization (WTO).Regional Trade Agreements (RTA)- Agreements among three or more countries in a region to reduce barriers to trade among themselves.Chapter 8 VocabPortfolio investments- Investments in a foreign country via the purchase of stocks (equities), bonds, or other financial investments. Portfolio investors do not exercise managerial control of the foreign operation.Sovereign lending- Loans from private financial institutions in one country to sovereign governments in other countries.Foreign Direct Investment (FDI)- Investment in a foreign country via the acquisition of a local facility or the establishment of a new facility. Direct investors maintain managerial control of the foreign operation.World Bank- An important international institution that provides loans at below-market interest rates to developing countries, typically to enable them to carry out development projects.Recessions- A sharp slowdown in the rate of economic growth and economic activity.Depressions- A severe downturn in the business cycle, typically associated with a major decline in economic activity, production, and investment; a severe contractionof credit and sustained high unemployment.Default- To fail to make payments on a debt.Austerity- The application of policies to reduce consumption, typically by cutting government spending, raising taxes, and restricting wages.Bank for International Settlements (BIS)- One of the oldest international financialorganizations, created in 1930. Its members include the world’s principal central banks, and under its auspices they attempt to cooperate in the financial realm.International Monetary Fund (IMF)- A major international economic institution that was established in 1944 to manage international monetary relations and that has gradually reoriented itself to focus on the international financial system, especially debt and currency crises. Multinational Corporations (MNC)- An enterprise that operates in a number of countries, with production or service facilities outside its country of origin.Bilateral Investment Treaty- An agreement between two countries about the conditions for private investment across borders. Most BITs include provisions to protect an investment from government discrimination or expropriation without compensation, as well as establishing mechanisms to resolve disputes.Chapter 9 VocabExchange Rate- The price at which one currency is exchanged for another.Fixed exchange rate- An exchange rate policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold.Appreciate- In terms of a currency, to increase in value in terms of other currencies.Gold standard- The monetary system that prevailed between 1870 and 1914, in which countries tied their currencies to gold at a legally fixed price.Depreciate- In terms of a currency, to
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