International Trade

Terms

Absolute Advantage - When a producer can create a given amount of output with the smallest amount of inputs.

Budget Deficit - When the government spends more money than it receives.

Capital - Money, machinery, and education put toward a business to increase its productivity.

Comparative Advantage - When a producer has a lower opportunity cost of production for an item than another producer's.

Consumption - Goods and services purchased by consumers.

Cost of living - The relative amount of money needed to maintain a given lifestyle.

Exchange Rates - Numbers that tell how much foreign product can be purchased with similar domestic product.

Exports - Goods sent to another country for sale.

Free Trade - Trade with which the government does not interfere.

Goods - Products that consumers, manufacturers, and governments exchange.

Imports - Goods produced in a foreign country and consumed in a domestic country.

Income - Money that enters a country or household.

Investment - Money spent to improve a company's growth and productivity.

Net Exports - The difference between exports and imports.

Net Foreign Investment - The total amount of investment in a country that results from trade deficits. Net foreign investment always equals net exports.

Nominal Exchange Rates - The amount of foreign currency that exchangeable for domestic currency.

Nominal Output - The amount of output valued in currency dollars.

Opportunity Cost - What is given up in pursuing one option over another.

Output - Goods and services produced.

Protectionist Policies - Governmental policies that serve to help developing domestic industries.

Quota - When a government limits the amount of a given good that can be imported. Imposing quotas is a protectionist policy.

Real Exchange Rates - Numbers that describe the relative real value of foreign and domestic goods.

Subsidy - Grants paid by the government to producers to help them develop. Subsidizing is a protectionist policy.

Tariff - Fees charged by the government on imported goods to help raise the price and decrease the quantity sold. Use of tariffs is a protectionist policy.

Trade - When goods from one producer are exchanged for goods from another producer. In this case, goods can be very broadly interpreted.

Trade Balance - Exports minus imports.

Trade Deficit - A trade deficit occurs when a country imports more than it exports.

Trade Surplus - A trade surplus occurs when a country exports more than it imports.