I have organized the Diagram Page so it would be easier for me to study for the IB exam. I tried to make the page more interesting by adding colors and graphic images.
Factor endowments: factors of production that a country had available to produce goods and services.
ex) Japan has strong human resource and Australia has coal.
Specialization: where a country specialized int he production of goods and services where they have a comparative advantage in production.
ex) Japan specializes in electronic goods, cars and Australia specializes in agriculture/commodities
Free trade: international trade that takes place without any barriers such as tariffs, quotas, or subsidies.
Tariff: a duty that is placed upon imports to protect domestic industries from foreign competition and to raise revenue for the government.
ex)Mexico imposes tariffs on US apples
Quota: an import barrier that sets upper limits on the quantity or value of imports that may be imported into a country.
ex) Mackerel quota in Iceland
Subsidy: an amount of money paid by the government to a firm, per unit of output to encourage output and to give the firm an advantage over foreign competitors.
ex) UK’s subsidy on electric cars
Voluntary export restraint: a voluntary agreement between an exporting country and an importing country that limits the volume of trade in a particular product.
ex) Japan reduced its car export to the US
Infant industry argument: argument that new industries shoal be protected from foreign competition until they are large enough to compete in international markets.
ex) In Brazil, for example, infant industries such as automobile production argue that they need protection
Dumping: selling of a good in another country at a price below its unit cost of production.
ex) US dumping apples in Mexico
Anti-dumping: legislation to protect an economy against the import of a good at a price below its unit cost of production.
ex) China’s Anti-dumping act on US chicken
Free trade Area: an agreement made between countries, where the countries agree to trade freely among the members of the group, but are able to trade with countries outside the free trade area in whatever ways they wish.
ex) A trade bloc agreement by the Association of Southeast Asian Nations supporting local manufacturing in all ASEAN countries.
Customs union: an agreement made between countries, where the countries agree to trade freely among themselves, and they also agree to adopt common external barriers against any country attempting to import into the customs union.
ex) Andean Community
Common market: a customs union with common policies on product regulation, and the free movement of goods, services, capital, and labor.
ex) EU
World Trade Organization: international body that sets the rules for global trading and resolves disputes between its member countries. It also hosts negotiations concerning the reduction of trade barrier between its member nations.
Balance of payments: record of the value of all the transactions between the residents of a country with the residents of all other countries over a given time period.
Balance of trade: a measure of the revenue received from the exports of tangible goods minus the expenditure on the imports of tangible goods over a given time period.
Invisible balance: a measure of the revenue received from the exports of services minus the expenditure on the imports of services over a given time period.
Current account: a measure of the flow of funds from trade in goods and services,net investment income flows, and net transfers of money.
Capital account: the measure of the buying and selling of assets between countries.
Current account surplus: this exists where the revenue from the export of goods and services and income flows is greater than the expenditure on the import of goods and services and income flows over a given time period.
Current account deficit: this exists where revenue from the export of goods and services and income flows is less than the expenditure on the import of goods and services and income flow over a given time period.
Expenditure-switching policies: policies implemented by the government that attempt tot switch the expenditure of domestic consumers away from umpires and towards domestically produced goods and services.
Expenditure-reducing policies: policies implemented by the government that attempt to reduce overall expenditure in the economy, including expenditure on imports.
Exchange rate: value of one currency expressed in terms of another.
Fixed exchange rate: an exchange rate regime where the value of a currency is fixed to the value of another currency.
Floating exchange rate: exchange regime where the value of a currency is allowed to be determined solely by the demand and supply for and of the currency on the foreign exchange market.
Depreciation: fall in the value of one currency in terms of another currency in a floating exchange rate system.
ex) US dollars
Appreciation: an increase in the value of one currency in terms of another currency in a floating exchange rate system.
ex) Chinese Yuan
Devaluation: a decrease in the value of a currency in a fixed exchange rate system.
Revaluation: an increase in the value of a currency in a fixed exchange rate system.
ex) Chinese Yuan
Deteriorating terms of trade or adverse terms of trade: this exists where the average price of exports fails relative to the average price of imports.
Elasticity of demand for exports: a measure of the responsiveness of the quantity demanded of exports when there is a change in the relative price of exports.
Elasticity of demand for imports: a measure of the responsiveness of the quantity demanded of imports when there is a change in the relative price of imports.
