Mr Michaels "I want what all men want...I just want it more" 5W2H

Latest News H Brazil Info Requested Going Home Fortune 500 List Chocolate Smile Relationship Stopping Show me the cookie Eternal Love One Spring Day Merry Christmas ZSU Speech Topics H Photos ZSU @ PHI PSY Mov An IND IN LE CF IFM IE MK International Economics Published: August 11, 2009 Print      International Economics Part I. An introduction to International Trade Gross national product (GNP) The value of final goods and services produced by domestic factors of production. Gross domestic product (GDP) The value of final goods and services produced within a country. Exports Goods sold by economic agents located in one country to economic agents located in another. Imports Good purchased by economic agents located in one country from economic agents located in another. Index of openness A measure of the importance of international trade to an economy, calculated as the ratio of exports over total domestic production. Trade deficits and surpluses A country has a trade deficit (surplus) if its imports (exports) exceed its exports (imports). Part II. Tools of Analysis for International Trade Models Positive analysis Analysis that studies economic behavior without making recommendations about what is or ought to be. Normative analysis Economic analysis that makes value judgments regarding what is or should be. General equilibrium Simultaneous equilibrium in all the markets of an economy. Money illusion A situations where individuals make decisions based on changes in some prices without taking into account changes in others. Relative price A ratio of two product prices. Nominal price A price expressed in terms of money. Production possibility frontier (PPF) A diagram that shows the maximum amount of one type of good that can be produced in an economy, given the production of the other. Opportunity (or social) cost The amount of production of one type of good that must be sacrificed to produce one more unit of the other. Indifference curve A diagram that expresses the consumption preferences of an individual consumer. Community indifference curve (CIC) A diagram that expresses the preferences of all the consumers of a country. Autarky A situation where a country does not take part in international trade. National supply The amount of national output of a particular good at various relative prices for that good. National demand The amount of national consumption of a particular good at various relative prices. Part III. The Classical Model of International Trade International division of labor Specialization by nations in the production of only a few goods. Mercantilism A system of government policies and institutions aimed at increasing exports and decreasing imports. Constant returns to scale A technological relationship such that proportionate changes in inputs lead to proportionate changes in output. Absolute advantage The ability of a country to produce a good using fewer productive inputs than is possible anywhere else in the world. Comparative advantage A country has comparative advantage in a good if the product has a lower pretrade relative price than is found elsewhere in the world. Terms of trade The relative price at which trade occurs between countries. Consumption possibility frontier The various bundles of goods that a country can obtain by taking advantage of international trade. Trade triangle A geometric device that tells us the amounts a country is willing to trade at a particular world price. Walras law In a world with n markets, if n -1 are in equilibrium, is is the nth. Reciprocal demand The process of international interaction of demand and supply necessary to produce an equilibrium international price. Importance of being unimportant When small countries trade with big countries, the small are likely to enjoy most of the mutual gains from trade. Part IV. The Heckscher-ohlin Theory Factor endowments The quantities of factors of production (e.g., labor and machines) possessed by a country. Labor (capital) intensive A good is labor (capital) intensive relative to another good if its production requires more (less) labor per machine than the other good requires in its production. Labor (capital) abundant A country is labor (capital) abundant relative to another country if it has more (less) workers per machine than the other country. Incomplete specialization A country is incompletely specialized in production if, after trade begins, it continues to produce some of the good it imports. Factor price equalization (FPE) Factor price equalization occurs if all individual factor prices (e.g., wages, rental payments) are identical when measured in the same currency. Part V. Test of Trade Models: The Leontief Paradox And its Aftermath Input-output table A table that details the sales of each industry to all other industries in an economy. Leontief paradox The finding that U.S. exports tend to come from labor-intensive industries, while U.S. imports are produced using relatively capital intensive techniques. Product life cycle The process by which a product is invented and then over time becomes more standardized as consumers and producers gain familiarity with its features. Intraindustry trade The simultaneous import and export of similar types of products by a country. Increasing returns to scale A technological situation in which proportionate increases in the use of productive inputs lead to greater than proportionate increases in output. Part VI. Tariffs Commercial policy Actions taken by a government to influence the quantity and composition of that country's international trade. Tariff A tax imposed by a government on either exports or imports. Quota A government mandated limitation on either the quantity or value of trade in a product. Subsidy A government payment to an industry based upon the amount it engages in international trade. Nontariff barriers A wide range of government policies other than tariffs designed to affect the volume or composition of a country's international trade. Static gains from trade Increases in economic well-being, holding resources and technology constant, that accrue to a country engaging in international trade. Dynamic gains from trade Increases in economic well-being that accrue to an economy because trade expands the resources of a country or induces increases in the productivity of existing resources. Political gains from trade Increases in economic well-being that accrue to a country because expanded trade and economic interdependency may increase the likelihood of reduced international hostility. Revenue effect The amount of revenue accruing to a government from a tariff. Protective effect The amount by which domestic producers are able to expand their output because a tariff is in place. Most favored nation (MFN) status A country confers MFN status upon another country by agreeing not to charge tariffs on that country's goods that are any higher than those it imposes on the goods of any other country. Ad valorem tariff A trade tax equal to a given percentage of selling price. Specific tariff A trade tax equal to a fixed amount of money per unit sold. Compound tariff A trade tax that has both a specific and an ad valorem component. Generalized system of preferences (GSP) A system where industrialized countries charge preferential lower tariff rates on goods from certain developing countries. Consumer surplus The difference between the amount consumers are willing to pay to purchase a given quantity of goods and the amount they have to pay to purchase those goods. Producer surplus The difference between the price paid in the market for a good and the minimum price required by an industry to produce and market that good. Deadweight cost of the tariff Value of wasted resources devoted to expanded domestic consumption and expenditures devoted to less desired substitutes brought about by a tariff. Optimal tariff The size of a tariff that raises the welfare of a tariff-imposing country by the greatest amount relative to free-trade welfare levels. Trade (or tariff) war A general reduction in world trade brought about by increases in trade barriers throughout the world. Average tariff A measure of the height of a country's tariff barriers. Tariff escalation Tariff rates that rise with stages of processing. Part VII. Non-Tariff Barriers and Arguments for Protection Quota A government mandated limitation on either the quantity or the value of trade in a product.  Embargo A complete ban on trade in a product or products. Tariff rate quotas (TRQs) Policies that allow a certain quantity of a good into a country at low (often zero) tariff rates, but then apply higher tariffs to quantities that exceed the quota. Quota rents Profits that come about because a quota has artificially raised the price of imported products. Voluntary export restraint (VER) An agreement reached between importing and exporting countries whereby the exporters agree to limit the amount they export. Export subsidy A payment by a government to an industry that leads to an expansion of exports by that industry. Countervailing duty A tariff imposed by an importing country designed to offset artificially low prices charged by exporters. 'Buy American' acts Laws that direct  purchasing agents of U.S. federal, state, and local governments to purchase American products unless comparable foreign goods are substantially cheaper. Infant industry argument The argument holding that new industries may need temporary protection until they have mastered the production and marketing techniques necessary to be competitive in the world market. Part VIII. Commercial Policy: History and Practice Logrolling The trading of votes by legislatures to secure approval on issues of interest (e.g., tariffs) to each one. Unconditional most favored nation status The principle of nondiscrimination in international trade. Dumping Selling a product in a foreign market at a price that is below fair market value. Predatory dumping Dumping in order to drive foreign competitors out of their market so that the market can be monopolized. International price discrimination Selling a product in two different countries at two different prices. Dumping margin The difference between the market price of a product and its fair market value. Injury test An investigation to determine whether an unfair foreign trade practice has caused or threatens to cause harm to a domestic industry. Countervailing duty A tariff designed to raise the price of an imported product to its fair market value. Upstream subsidy A subsidy that lowers the cost of an input for a manufacturer. Section 301 A provision in the U.S. trade law that requires the U.S. government to negotiate the elimination of foreign unfair trade practices and to retaliate against offending countries if negotiations fail. Escape clause A measure in the U.S. trade law that allows for temporary protection against fairly traded foreign imports. Trade adjustment assistance (TAA) Payments made by the government to help factors retrain or retool after they have been displaced by foreign competition. Safeguards protection A general name for measures such as the escape clause. Part IX. Preferential Trade Agreements Free-trade area (FTA) An agreement among several countries to eliminate internal barriers to trade but to maintain existing barriers against nonmember countries. Customs unions (CU) An agreement among several countries to eliminate internal barriers to trade and to erect common barriers against nonmember countries. European Union (EU) A CU among most of the nations of Western Europe. North American Free Trade Agreement (NAFTA) An FTA among Canada, Mexico, and the United States Trade diversification A shift in the pattern of trade from low-cost world producers to higher-cost CU or FTA members. Trade creation An expansion in world trade that results from the formation of a preferential trade arrangement. Single European Act An act passed by the EU to remove various NTBs between the member countries. European Commission One of two executive offices of the EU government; its chief responsibility is to draft and enforce EU laws. Council of the EU One of the two executive offices of the EU government; it has the power to make decisions about European Commission proposals and to issue directives and regulations to the member states. European Court of Justice Chief judiciary body of the EU that decides on the legality of council or commission actions. European Parliament Legislative branch of the EU government and the chief representative of the populace in the process of setting EU policy. Part X. International Trade and Economic Growth Economic development The achievement of a quality of life for the average citizen of a country that is comparable to that enjoyed by the average citizen of a country with a modern economy. Primary-export-led development strategies Government programs designed to exploit natural comparative advantage by increasing production of a few export goods most closely related to a country's resource base. Linkage effects Benefits to other industries or sectors of an economy that occur as one industry expands. Import-substitution development strategies Policies that seek to promote rapid industrialization by erecting high barriers to foreign goods to encourage local production. Outward-looking development strategies Government support for manufacturing sectors in which a country has potential comparative advantage. Neutral economic growth A proportionate increase in all factors and consumption so that trade expands proportionately to the growth of the economy. Protrade biased growth Growth that results in an expansion of trade that exceeds the rate of growth of GDP. Antitrade biased growth Growth that results in a reduction of trade relative to the size of the economy. Neutral technical change An innovation that results in an equipproportionate reduction in the use of all factors in the production of one unit of output. Labor-saving (capital-saving) technical change An innovation that results in a more than proportionate reduction in the use of labor (capital) relative to other factors in the production of one unit of output. Immizerizing growth Economic growth that results in a reduction in national economic welfare. Guest workers Foreign workers who are invited to temporarily relocate in a country to work in a certain sector of an economy. Brain drain The permanent relocation of skilled workers form one country to another. Multinational corporation (MNC) A corporation that operates production or marketing facilities in more than one country. Marginal product of labor The additional amount of output (in physical terms) that is produced because one more worker is added to the production process. Diminishing returns to labor The fact that as workers are added to the production process, holding all other factors fixed, the marginal product of labor declines. Value marginal product of labor The monetary value of the marginal product of labor. Part XI. An Introduction to International Finance Trade Surplus Merchandise exports exceed imports Trade deficit Merchandise imports exceed exports Exchange rate The price of one money in terms of another Part XII. The Balance of Payments Balance-of-payments deficit (Surplus) Balance-of-payments debit items exceed (are less than) the credit items in value. Balance of trade The value of merchandise exports minus imports. Basic balance The current account plus long-term capital. Liquidity balance The basic balance plus short-term capital plus errors and omissions. Official settlements balance The value of the change in short-term capital held by foreign monetary agencies and official reserve asset transactions. Balance-of-payments equilibrium Credits equal debits for a particular account. Flexible exchange rates Free-market supply and demand determines the value of currencies. Fixed exchange rates Central banks peg exchange rates at desired levels. Part XIII. The Foreign-Exchange Market Exchange rate The price of one money in terms of another. Spread The difference between the buying and selling price of a currency. Spot market Where currencies are traded for current delivery. Cross rate The third exchange rate implied by any two exchange rates involving three currencies. Depreciate The value of one currency falls relative to another. Appreciate The value of one currency rises relative to another. Forward exchange market Where currencies may be bought and sold for delivery in a future period. Forward premium The forward exchange rate exceeds the spot rate. Forward discount The forward exchange rate is less than the spot rate. Foreign exchange swap An agreement to trade currencies at one date and reverse the trade at a later date. Hedging An activity to offset risk. Margin A deposit with a broker required for trading in the futures market. Call option An option to buy currency. Put option An option to sell currency. Striking price (Exercise price) The price of currency stated in an option contract. Black market An illegal market in foreign exchange. Parallel Market A free market allowed to coexist with the official market. Part XIV. Prices and Exchange Rates: Purchasing Power Parity Nominal value A value dependent on current price levels. Law of one price Similar goods sell for the same price worldwide. Relative price change The price of one good relative to another good changes. Random Moving in an unpredictable manner. Endogenous variable A variable whose value is determined by some given factors. Exogenous variable A variable whose value is given to the economic system by an outside force, such as government or nature. Shock An unexpected change. News Unexpected information. Spurious relationship Not a genuine relationship. Undervalued currency Currency worth less than PPP value. Overvalued currency Currency worth more than PPP value. Part XV. Exchange Rates, Interest Rates, and Interest Parity Covered return The domestic-currency value of a foreign investment when the foreign-currency proceeds are sold in the forward market. Interest rate parity The forward premium or discount is equal to the interest differential. Effective return The foreign interest rate plus the forward premium or discount. Uncovered interest parity The expected change in the exchange rate is equal to the interest differential. Nominal interest rate The rate actually observed in the market. Real interest rate The nominal interest rate minus inflation. Fisher equation The nominal interest rate is equal to the real interest rate plus expected inflation. Term structure of interest rates The pattern of interest rates over different terms to maturity. Part XVI. Foreign-Exchange Risk, Forecasting, and International Investment Exchange risk exposure Translation, transaction, and economic exposure are three concepts of exposure to foreign exchange risk. Translation exposure This is also known as accounting exposure and can be found as the difference between foreign-currency-denominated assets and foreign-currency-denominate liabilities. Transaction exposure This is exposure resulting from the uncertain domestic-currency value of a foreign-currency-denominated transaction to be completed at some future date. Economic exposure This is the exposure of the value of the firm to changes in exchange rates. If the value of the firm is measured as the present value of future after-tax cash flows, then economic exposure is concerned with the sensitivity of the real domestic-currency value of long-term cash flows to exchange rate changes. Risk premium The difference between the forward rate and the expected future spot rate. Risk aversion The tendency of investors to prefer less risk. Efficient market A market where prices reflect all available information. Long position Buying currency for future delivery. Short position Selling currency for future delivery. Diversified portfolios Assets denominated in several currencies. Variance A measure of the dispersion of a variable about its mean value. Covariance A measure of how two variables fluctuate about their means together. Systematic risk The risk common to all investments. Nonsystematic risk The risk that can be eliminated with diversification. Home bias Investors prefer domestic securities to foreign securities. Contagion effect A crisis in one country spills over into other countries. Capital flight  Large capital outflows resulting from unfavorable investment conditions in a country. Part XVII. Basic Theories of Balance of Payments Relative price The ratio of two product prices. Elasticity The responsiveness of quantity to changes in price. J curve effects After a devaluation, the balance of trade falls for a while before increasing. Currency-contract period The period immediately following a devaluation when contracts signed prior to the devaluation are settled. Pass-through analysis The adjustment of domestic and foreign prices to devaluation. Pricing to market Adjusting export prices in response to exchange rate changes in order to limit changes in the prices paid by importers. Absorption Total domestic spending Adjustment mechanism The process by which international disequilibria are eliminated. Base money Currency plus commercial bank reserves, which is also equal to international reserves plus domestic credit. Domestic credit The domestic component of base money. International reserves The portion of base money used to settle international debts. Small, open economy An economy that cannot affect the international price of goods or the foreign interest rate. Part XVIII. Exchange Rate Theories Perfect capital mobility A situation in which there are no barriers to international capital flows. Portfolio-balance approach A theory of exchange rate determination arguing that the exchange rate is a function of relative supplies of domestic and foreign bonds. Sterilized intervention A foreign exchange market intervention that leaves the domestic money supply unchanged. Currency union An agreement between countries to fix exchange rates and coordinate monetary policies. Part XIX. Alternative International Monetary Standards Gold standard Currencies have fixed values in terms of gold. Commodity money standard The value of money is fixed relative to a commodity. Exchange rate arrangements Crawling pegs The exchange rate is adjusted periodically in small amounts at a fixed, preannounced rate or in response to certain indicators (such as inflation differentials against major trading partners). Crawling bands The exchange rate is maintained within certain fluctuation margins around a central rate that is periodically adjusted at a fixed, preannounced rate or in response to certain indicators. Managed floating The monetary authority (usually the central bank) influences the exchange rate through active foreign exchange market intervention with no preannounced path for the exchange rate. Independently floating The exchange rate is market determined, and any intervention is aimed at moderating fluctuations rather than determining the level of the exchange rate. No separate legal tender Either another country's currency circulates as the legal tender, or the country belongs to a monetary union where the legal tender is shared by the members (like the euro). Currency board A fixed exchange rate is established by a legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate. New issues of domestic currency are typically backed in some fixed ratio (like one-to-one) by additional holdings of the key foreign currency. Fixed peg The exchange rate is fixed against a major currency or some basket of currencies. Active intervention may be required to maintain the target pegged rate. Horizontal bands The exchange rate fluctuates around a fixed central target rate. Such target zones allow for a moderate amount of exchange rate fluctuation while tying the currency to the target central rate. Destabilizing speculation Speculators increase the variability of exchange rates. Seigniorage The difference between the exchange value of a money and its cost of production. Part XX. International Banking, Debt, and Risk Eurocurrency market The deposit and loan market for foreign currencies. London interbank offer rate (LIBOR) The key interest rate in the Eurocurrency market. International banking facilities (IBFs) International banking divisions of onshore U.S. banks Petrodollars Eurodollar deposits arising from OPEC trade surpluses. Paris Club A gathering of creditor country governments to arrange debt rescheduling. Debt/equity swap An exchange of developing country debt for an ownership position in a developing country business. Part XXI. Open-Economy Macroeconomic Policy and Adjustment Internal balance A rate of domestic economic growth consistent with a low unemployment rate. External balance Achieving a desired trade or capital account balance. IS curve Combinations of i and Y that provide equilibrium in the goods market. LM curve Combination of i and Y that provide equilibrium in the money market. BP curve Combinations of i and Y that provide equilibrium in the balance of payment. Crowding out An increase in government spending is offset by a reduction in private spending, such as net exports. Mundell-Fleming model The IS-LM-BP model with flexible exchange rates and perfect capital mobility. Locomotive effect The stimulation of the large country economy aimed at increasing growth in the rest of the world. Open-economy multiplier A multiplier equal to the reciprocal of the marginal propensity to save plus the marginal propensity to import. View Comments (0)

Is Corporation Website Powered by Michael