Trade Deficit
When a nation imports more than it exports
Trade Surplus
When a nation exports more than it imports
Products become Cheaper
when a nation's currency depreciates
Fixed Exchange Rate
when each country tries to keep the value of its currency constant against one another
Flexible Exchange Rate
when the value of currency is determined by supply and demand
Major Disadvantage in the use of import barriers
domestic manufacturers lose the incentive to become more efficient
protection from foreign industries is necessary b/c
of protection against new industries as those industries develop
Infant Industry
a young or developing industry
European Union
a regional trade organization of European nations; the countries replaced their individual currencies w/ the euro in 2002
Most Favored Nation
when the U.S. grants economic status to a country so that it allows that country to pay the same tariffs as other countries w/ this status
NAFTA
a treaty that elimantes all trade barriers between the U.S., Canada, and Mexico
Specialization leads to
international trade
Law of Comparative Advantage
states that a country should specialize and export goods w/ the lowest possible opportunity cost
Import Quota
when a country places a limit on the number of imports from another country