Unit 6: Open Economy - International Trade & Finance

• Quotas: limitations on the amount of specific products that may be imported from certain countries during a given time period
• Subsidies: a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.
• Absolute Advantage: the advantage conferred by the ability to produce more of a good or service with a given amount of time and resources
• Comparative Advantage: the advantage conferred by an individual if the opportunity cost of producing the good or service is lower for that individual that for the other people
• World Price: The global equilibrium price of a good when nations engage in trade
• Domestic Price: the price that would prevail in a closed economy that does not engage in international trade
• Balance of Payments on Goods and Services: the difference between the value of its exports and the value of its imports during a given period
• Trade Deficit: the amount by which the cost of a country's imports exceeds the value of its exports.
• Trade Surplus: the amount by which the value of a country's exports exceeds the cost of its imports.
• Capital Account: the difference between a country's sales of assets to foreigners and its purchases of assets from foreigners during a given period
• Depreciation: when the value of an asset is reduced by wear, age, or obsolescence; also, when a currency become less valuable in terms of other currencies
• Appreciations: when a currency becomes more valuable in terms of other currencies
• World Trade Organization (WTO): International organization derived from the General Agreement on Tariffs and Trade (GATT) that promotes it free trade around the world.
• Devaluation: reduction in the value of a currency that is set under a fixed exchange rate regime