Exam 2 Vocabulary Absolute Advantage Austerity Appreciate Bilateral Investment Treaty BIT Bretton Woods Business Cycle Cartels Comparative Advantage Default Depreciate Dollarization Division of Labor Specialization Export Oriented Industrialization EOI 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 The application of policies to reduce consumption typically by cutting government spending raising taxes and restricting wages In terms of a currency to increase in value in terms of other currencies 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 The monetary order negotiated among the World War II allies in 1944 which lasted until the 1970s and which was based on a U S dollar tied to gold Other currencies were fixed to the dollar but were permitted to adjust their exchange rates The fluctuations in economic activity that an economy experiences over a period of time An association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition The ability of a country firm to produce a particular good or service more efficiently than other goods or services such that its resources are 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 firms To fail to make payments on a debt In terms of a currency to decrease in value in terms of other currencies The separation or specialization of a work process into a number of tasks with each task performed by a separate person or group of persons Adopting the US dollar as the currency of choice in a foreign country A set of policies originally pursued starting in the late 60s by several East Asian countries to spur manufacturing for export often through subsidies and incentives for export production Factors of Production An economic term to describe the inputs that are Fixed or Pegged Exchange Rate Floating Exchange Rate Foreign Aid Foreign direct investment FDI General Agreement on Tariffs and Trade GATT Gold Standard Heckscher Ohlin trade theory Import Substitution Industrialization ISI Infrastructure International Monetary Fund IMF Monetary Policy used in the production process in order to produce output that is finished goods 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 An exchange rate policy under which a government permits its currency to be traded on the open market without direct government control or intervention Money food or other resources given or lent by one country to another 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 An international institution created in 1948 in which member countries 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 The monetary system that prevailed between about 1870 and 1914 in which countries tied their currencies to gold at legally fixed price The theory that a country will export goods that make intensive use of the factors of production in which it is well endowed Thus a labor rich country will export goods that make use of labor A set of policies pursued by most developing countries from the 1930s through the 1980s to reduce imports and encourage domestic manufacturing and state ownership of basic industries Basic structures necessary for social activity such as transportation and telecommunications networks and power and water supply 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 An important tool of national governments to influence broad macroeconomic conditions such as unemployment inflations and economic growth Typically governments alter their monetary policies by changing national interest Most favored Nation status MFN Multinational Corporation MNC Nontariff Barrier to Trade NTB Organization of Petroleum Exporting Countries OPEC Portfolio investment Protectionism Reciprocity Ricardo Viner Model Regional Trade Agreements Resource Curse rates or exchange rates A status established buy most modern trade agreements guaranteeing that the signatories will extend to each other any favorable trading terms offered in agreements with third parties An enterprise that operates in a number of countries with production or service facilities outside its country of origin Obstacles to imports other than tariffs trade taxes Examples include restrictions on the number of products that can be imported quantitative restrictions or quotas regulations that favor domestic over imported products and other measures that discriminate against foreign goods or services An international organization and economic cartel whose mission is to coordinate the policies of the oil producing countries The goal is to secure a steady income to the member states and to influence world oil prices through economic means Investments in a foreign country via the purchase of stocks equities bonds or other financial instruments Portfolio investors do not exercise managerial control of the foreign operation The imposition of barriers to restrict imports Commonly used protectionist devices include tariffs quantitative restrictions quotas and other non tariff barriers 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 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 Hecksher Ohlin approach for which the nature of the factor labor land capital is the principal consideration Agreements among three or
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