WHAT IS GLOBALIZATION?
THE PROCESS OF GREATER INTERDEPENDENCE AMONG COUNTRIES AND THEIR CITIZENS. INCREASED INTEGRATION OF PRODUCT AND RESOURCE MARKETS ACROSS NATIONS VIA TRADE, IMMIGRATION AND FOREIGN INVESTMENT.
WHAT IS AUTARKY?
THE ABSENCE OF TRADE
WHAT IS THE PRICE SPECIE FLOW DOCTRINE?
BY DAVID HUME A FAVORABLE TRADE BALANCE WAS POSSIBLE ONLY IN THE SHORT RUN, OVERTIME IT WOULD AUTOMATICALLY BE ELIMINATED.WHEN WE TRADE PRICE OF METALS GOES UP SO DOES VALUE OF MONEY AND SO DO PRODUCTS IN THAT COUNTRY, THEY WILL BECOME LESS ATTRACTIVE BECAUSE OF TRADE SURPLUS.
WHAT IS MERCANTILISM?
TRADE SHOULD BE CONTROLLED HEAVILY BY THE GOVERNMENT BECAUSE EXPORTS ARE GOOD AND IMPORTS ARE BAD. EXPORTS GIVE JOBS TO PEOPLE. GOVERNMENTS SHOULD PROMOTE EXPORTS AND REDUCE IMPORTS.
WHAT IS THE PRINCIPLE OF ABSOLUTE ADVANTAGE?
WHEN ONE NATION HAS AN ABSOLUTE COST ADVANTAGE (THAT IS USES LESS LABOR TO PRODUCE A UNIT OF OUTPUT) A NATION WILL IMPORT GOODS IN WHICH IT HAS AN ABSOLUTE COST DISADVANTAGE, AND WILL EXPORT GOODS IN WHICH IT HAS AN ABSOLUTE COST ADVANTAGE.
WHAT IS THE PRINCIPLE OF COMPARATIVE ADVANTAGE?
IF ONE COUNTRY HAS COMPARATIVE ADVANTAGE IN ONE GOOD, ANOTHER COUNTRY WILL HAVE C.A. IN ANOTHER GOOD.
WHAT IS THE FACTOR ENDOWMENT THEORY?/HECKSCHER OLIM THEORY
Simply put, countries with plentiful natural resources will generally have a comparative advantage in products using those resources.
WHAT IS INTERINDUSTRY TRADE?
THE EXCHANGE B/W NATIONS OF PRODUCTS OF DIFFERENT INDUSTRIES EX COMPUTERS AND AIRCRAFT TRADED FOR TEXTILES AND SHOES.
WHAT IS INTRAINDUSTRY TRADE?
2 WAY TRADE IN A SIMILAR COMMODITY
WHAT IS AN AD VALOREM (VALUE) TARIFF?
MUCH LIKE A SALES TAX, IT IS EXPRESSED AS A FIXED PERCENT.
WHAT IS THE STOLPER SAMUELSON THEORY? REAL RETURN?
AN INCREASE IN THE PRICE OF A GOOD AS A RESULT OF EXPORT INCREASES THE REAL RETURN ON THE ECONOMIC RESOURCE THAT IS INTENSIVELY USED IN PRODUCTION OF GOOD AND LOWERS RETURN ON OTHER ECONOMIC RESOUCES.
WHAT IS A COMPOUND TARIFF?
A COMBINATION OF BOTH SPECIFIC AND AD VALOREM TARIFFS.
WHAT IS THE EFFECTIVE TARIFF RATE?
NOT ONLY THE NOMINAL TARIFF RATE, ON A FINISHED PRODUCT, BUT ALSO ANY TARIFF RATE APPLIED TO IMPORTED INPUTS THAT ARE USED IN PRODUCING THE FINISHED PRODUCT.
WHAT IS A PROTECTIVE TARIFF?
DESIGNED TO REDUCE THE AMOUNT OF IMPORTS ENTERING THE COUNTRY.
WHAT IS A REVENUE TARIFF?
THESE ARE IMPOSED FOR THE PURPOSE OF GENERATING TAX REVENUES AND MAY BE PLACED ON EITHER EXPORTS OR IMPORTS.
WHAT IS A SPECIFIC TARIFF?
EXPRESSED IN TERMS OF A FIXED AMOUNT OF MONEY.
WHAT IS DUMPING?
INTERNATIONAL PRICE DISCRIMINATION. WHEN FOREIGN BUYERS ARE CHARGED LOWER PRICES THAN DOMESTIC BUYERS FOR AN IDENTICAL PRODUCTAFTER ALLOWING FOR TRANSPORATION COSTS AND TARIFF DUTIES.
WHAT IS AN IMPORT QUOTA?
A PHYSICAL RESTRICTION ON THE QUANTITY OF GOODS THAT MAY BE IMPORTED DURING A SPECIFIC TIME PERIOD THE QUOTA GENERALLY LIMITS IMPORTS TO A LEVEL BELOW THAT WHICH WOULD OCCUR UNDER FREE TRADE CONDITIONS.
WHAT IS ITT (INTERNATIONAL TERMS OF TRADE)?
PRICE RATIO THAT IS AGREEABLE FOR THOSE WHO WANT TO TRADE.
WHAT ARE THE IMPLICATIONS OF THE H-O THEOREM?
FACTOR PRICE EQUALIZATION THEOREMSTOLPER SAMUELSON THEOREMSPECIFIC FACTOR THEOREM
WHAT IS THE LEONTIF PARADOX?
AFTER WWII K/L RATIO OF THE US WAS HIGHER THAN THAT OF UK THIS EXPLAINED WHY US WAGES WERE 4X HIGER THAT UK
MACDOUGALS PRODUCTIVITY THEOREM
UNIT LABOR COST= LABOR COST/PRODUCTIVITY OF WORKERS
LINDERS OVERLAPPING DEMAND THEORY
COUNTRIES TRADE WHERE THEY HAVE SIMILAR TASTE
INTRAINDUSTRY TRADE INDEX (IITI) FORMULA
1- |X-M|/X+M
ECONOMIES OF SCALE
A DECREASE IN COST INDUSTRY-IF A COUNTRY LOWERS ITS PRICE IT CAN CAPTURE A LARGER MARKET IF THEY EXPAND OVERSEAS.
EFFECTS OF A TARIFF IN A SMALL COUNTRY CASE
TERMS OF TRADE EFFECT- IMPORT PRICE INCREASES DETERIORATES THE COUNTRIES TERMS OF TRADE (FEWER IMPORTS FOR EXPORTS)CONSUMPTION EFFECT- Q1-Q2PRODUCTION EFFECT- Q2-Q2REVENUE EFFECTREDISTRIBUTION EFFECTDEAD WEIGHT LOSSES (LOSS OF FREEDOM OF CHOICE LOSS OF INEFFICENCIES)
WHAT IS TRUE IF YOU ELIMINATE A TARIFF?
YOU HAVE A NET GAIN OF THE DEAD WEIGHT LOSSES
gain to consumers from removing tariff
tariff x consumption + TARIFF X CONSUMPTIONS 1/2
LOSS TO PRODUCERS FROM REMOVING TARIFF
TARIFF X PRDCTN W/O TARIFF + 1/2 TARIFF X 2
THE LOSS OF TARIFF REVENUES TO US GOVERNMENT
TARIFF X TARIFF IMPORT