POL 202: Exam 2+
22 Cards in this Set
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Comparative Advantage
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Producing a good at a lower opportunity cost than any other country
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Absolute Advantage
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Producing a good more efficiently than any other country
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Opportunity cost
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What a country forgoes in order to produce a particular good
Example:
England must forgo 2 bolts of cloth to make a barrel of wine (30÷15).
Portugal must forgo 11⁄2 bolts of cloth to produce a barrel of wine, or it can give up 2⁄3 of a barrel of wine to produce a bolt of c…
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Factor endowments (factors of production)
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The material and human resources a country possesses
Land (essential for agricultural production)
Labor (unskilled labor)
Capital for investment (machinery, equipment and financial assets)
Human capital (skilled labor)
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Protectionism
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use of specific measures to shield domestic producers from imports.
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use of specific measures to shield domestic producers from imports.
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Impediments to the import of foreign goods.
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Tariff
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A tax on imports levied at the border and paid by the importer
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Quota
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limits the quantity of a foreign good that can be sold domestically
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Redistributive effect
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income is redistributed from domestic consumers to the protected domestic industry
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Trade liberalization
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Dismantling of trade barriers, creates winners and losers
promotes liberalization: America 1945 Post-WWII
Institution that promotes liberalization: GATT
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Dumping
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selling goods below the true cost of production in order to drive out competitors and gain market share
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How the WTO enforces dispute settlements
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retaliatory tariffs
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Foreign Portfolio Investment
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give the investor a claim on some income, but no role in managing the investment
Interest: rate of return
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Foreign Direct Investment (FDI)
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Carried out by corporations that maintain control over the facilities they establish overseas
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Why can't geographic location fully explain why some countries are poor and others are rich?
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Take into account:
Domestic interests/institutions
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Infrastructure
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Public goods that increase development
Physical infrastructure (roads, airports, ports, etc.)
Economic institutions (financial systems, etc.)
Social infrastructure (public health, education, etc.)
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Primary Products
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agricultural and raw materials
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Import-substitution industrialization (ISI)
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A set of policies that reduced imports and encouraged domestic manufacturing
Outlines:
Trade barriers to protect domestic manufacturers
Government incentives to draw investors into the modern industrial sector
Government provision of industrial services (such as electric power…
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Export-oriented industrialization (EOI)
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A set of policies that encourage manufacturers to produce for foreign consumers
Techniques:
tax breaks to exporters
low-cost loans
weak currency helped make their products artificially cheap
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Washington Consensus
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Transformation towards a general acceptance of trade liberalization, privatization, Fiscal and Monetary policies
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Privatization
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The selling off of many government enterprises to private investors who would presumably run them more efficiently
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Fiscal and Monetary policies
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were executed to avoid deficits and high inflation.
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