Chapter 17-- Vocab Quiz

Comparative advantage refers to a situation where a country can produce a particular product more efficiently than another country, considering the opportunity cost. This means that the country can produce the product at a lower cost or with fewer resources compared to the other country. This concept is important in international trade as it allows countries to specialize in producing goods or services in which they have a comparative advantage, leading to increased efficiency and overall economic growth.

A trade surplus occurs when the value of a nation's exports exceeds the value of its imports. This means that the country is selling more goods and services to other countries than it is buying from them. A trade surplus can be beneficial for a country as it indicates a strong export sector and can contribute to economic growth. It can also lead to an increase in foreign exchange reserves and a stronger currency.

A limit on the amount of a good that can be allowed into a country is defined as a quota. A quota is a restriction imposed by a government or an organization on the quantity of a particular good that can be imported or exported. It is used to regulate trade and protect domestic industries. Quotas can be set in terms of quantity or value, and they can be applied to specific goods or to goods from specific countries. By limiting the amount of imported goods, quotas can help control supply and demand, protect domestic industries, and maintain a balance of trade.

A tariff is a tax placed on an imported product. This tax is imposed by a country to make imported goods more expensive, thereby protecting domestic producers from foreign competition. By increasing the cost of imported goods, tariffs encourage consumers to buy domestically produced goods instead. This helps to support domestic industries and can be seen as a way to protect domestic jobs and promote economic growth within the country.

Foreign exchange refers to the currencies of different countries that are used for conducting international trade. It involves the conversion of one currency into another in order to facilitate cross-border transactions. The term "foreign exchanges" is also used interchangeably to describe this concept. It is an essential component of the global economy, allowing countries to buy and sell goods and services from each other using different currencies.

The correct answer is the balance of payments outcome when spending on imports exceeds revenues received from exports. This means that a country is importing more goods and services than it is exporting, resulting in a deficit in its balance of payments.

A revenue tariff is a tax imposed on imported goods with the purpose of generating revenue for the government. This type of tariff is not intended to protect domestic industries or regulate trade, but rather to generate income for the government through the taxation of imported goods. By imposing taxes on imported goods, the government can raise funds that can be used for various purposes such as infrastructure development, public services, or reducing budget deficits.

The correct answer explains the concept of balance of payments, which refers to the difference between money paid to and received from other nations in trade. It further clarifies that the balance on the current account includes both goods and services, while the merchandise trade balance only considers goods. This answer accurately defines the term and provides a clear distinction between the two components of the balance of payments.

The correct answer is a country's ability to produce more of a given product than another country. This refers to the concept of absolute advantage, where a country can produce a larger quantity of a specific product using the same amount of resources compared to another country. This advantage is based on productivity and efficiency, allowing the country to have a greater output and potentially dominate the market for that particular product.

The correct answer is "System under which the value of currencies were fixed in relation to one another; the exchange rate system is effect until 1971." This answer accurately describes the concept of flexible exchange rates. Flexible exchange rates refer to a system where the value of currencies fluctuates based on market forces, such as supply and demand. Before 1971, the exchange rate system was fixed, meaning that the value of currencies was set in relation to one another and remained constant. This fixed exchange rate system was replaced by flexible exchange rates in 1971.

The trade-weighted value of the dollar refers to an index that measures the strength of the United States Dollar against a market basket of other foreign currencies. This index takes into account the trade relationships and weights the currencies accordingly. It provides a comprehensive measure of the dollar's value in international trade and is used to analyze currency movements and their impact on trade and economic conditions.

The infant industries argument states that new and emerging industries should be protected from foreign competition until they are strong enough to compete.

A protectionist is a person who would protect domestic producers with tariffs, quotas, and other trade barriers.