Term
| Describe the cultural adjustment curve by Gullahorn & Gullahorn. |
|
Definition
| The curve is shaped like a "W". First there is a high degree of satisfaction and then culture shock. At the end there is a feeling of home and upon return to home place there is reverse culture shock. |
|
|
Term
| What are the seven reasons for import restrictions? |
|
Definition
1.Unemployment argument
2.Cheap labor argument
3.Infant industry argument
4.Industrialization argument
5.National Income argument
6.Political argument
7.Balance of Payment argument |
|
|
Term
| Describe the Unemployment argument used for import restrictions. |
|
Definition
Argues imports will increase unemployment rate.
Problems:
1.High inflation
2.Pay more for expensive products which could be made cheaper elsewhere
3.Potential retaliation for not allowing imports |
|
|
Term
| Describe the cheap labor argument used for import restrictions. |
|
Definition
The argument is used to protect against exploitation of foreign workers and violations of human rights
Problems:
1.Restrictions could help more than hurt
2.Basically saying goods are too cheap to buy
3.Domestic intervention of foreign affairs
4.Protectionism disguised as humanitarianism |
|
|
Term
| Describe the Infant industry argument used for import restrictions. |
|
Definition
Protects small, new domestic firms since they can't enjoy economies of scale and have a learning curve
Problems:
1.Keep protection forever |
|
|
Term
| Describe the industrialization argument used for import restrictions. |
|
Definition
Used to restructure agriculture oriented economy into a industrialized economy due to deteriorated trade
Problems:
1.Citizens' sacrifice required |
|
|
Term
| Describe the National income argument used for import restrictions. |
|
Definition
Increase national income by minimizing imports (from the economist John Maynard Keynes)
Y=Demand=Consumption+Investment+gov't spending+(Net Exports-Net imports)
Problems:
1.Often makes both parties worse off since both can't reduce imports and increase exports |
|
|
Term
| Describe the Political argument used for import restrictions. |
|
Definition
Used to protest/punish unacceptable political behavior
Problem:
1.Can hurt punisher more than punishee |
|
|
Term
| Describe the Balance of Payment argument used for import restrictions. |
|
Definition
Less imports in order to reduce balance of payment or trade deficit
Problem:Political ramifications |
|
|
Term
| What are the various forms of tariffs and what are the objectives of each? |
|
Definition
1.Revenue tariff:Increases gov't revenue
2.protective tariff:protect domestic industry
3.progressive tariff:discourage luxurious imports
4.Retaliatory Tariff:Retaliate against foreign tariff
5.Countervailing tariff:Offset foreign subsidies
6.Punitive tariff:Punish unacceptable behavior of foreign gov't |
|
|
Term
| What are the methods for assessing tariffs? |
|
Definition
1.Specific duty-fixed amount of tax for 1 unit imported
2.Ad-Valorem duty-percent (%) of the value of the goods imported
3.Compound duty-combination of duty and ad-valorem |
|
|
Term
| What are some non-tariff trade barriers? |
|
Definition
1.Governemnt subsidies
2.Exchange rate manipulation
3.Customs house (Delay imports with documents/inspections/inflating value of imports)
4.Quota
5.Buy local policy
6.Foreign exchange control (refuse to hold $)
7.Complicated/burdensome import procedures
-import licenses/gov't approval/import deposit required |
|
|
Term
|
Definition
An article olf the US trade act that requires US government to prepare a list of countries that systematically restrict access of US products to their markets.
If trade dispute with one of the countries cannot be resolved through negotiation, the law requires to impose trade sanction on the country |
|
|
Term
| What are some benefits of economic intergration? |
|
Definition
1.Economices of Scale
2.Improved efficiency
3.Improve bargaining power |
|
|
Term
| Whate are some problems with economic efficiency? |
|
Definition
1.Trade diverts away from efficient non menbers to inefficient members
2.Creation of mutually exclusive blocs escalates international conflict |
|
|
Term
| What is the european Union? |
|
Definition
Formed in 1993 with 11 members, now has 25 members
1.Motivation:Fear of being left alone
2.Objective:restoration of economic competitiveness
3.Methods:Removal of barriers (physical/financial/technical/fiscal)
4.Challenges:balancing national and common goals/loss of control/identity/language/differing economic conditions) |
|
|
Term
|
Definition
North American Free Trade Agreement
Set up to:
1.eliminate tariffs and non tariff barriers
2.Harmonize trade rules
3.reduce restrictions on FDI and services |
|
|
Term
| What are the goals of the Free Trade Agreement with Canada? |
|
Definition
1.Expand market opportunities
2.Widen choices
3.Improve efficiency
4.Horizontal integration |
|
|
Term
| What are the goals of the Free trade agreement with Mexico? |
|
Definition
1.Utilize cheap labor
2.curb illegal immigartion
3.expand market to Mexico
4.Secure souce of energy (Oil in Mexico)
Problems:
Job loss in labor intensive industries in America, downward pressure on US wages, environmental concerns |
|
|
Term
| Graph of Economic Integration |
|
Definition
|
|
Term
|
Definition
Asia Pacific Economic Cooperation
Economic forum of 22 Asia-Pacific Countries that account for more than 2/3 of total world output (Japan/China/Russia/US/Canada/Mexico) |
|
|
Term
| What is the World Trade Organization? |
|
Definition
Successor to GATT
Has several roles:
1.Forum for negotiation to liberalize trade
2.Uniform/consistant rules for trade
3.Mechanism for trade disputes |
|
|
Term
| What are the principles of the WTO? |
|
Definition
Principles of WTO:
1.Multilateral agreements called a "Round" (In 9th round now)
2.Most favored nation provision:trade concessions to a country's best trading partner must be extended to all other WTO members |
|
|
Term
| What are the Different quotes used in the foreign exchange market? |
|
Definition
Direct/American Quote-Dollars/Foreign Currency
Indirect/European Quote-Foreign Currency/Dollars |
|
|
Term
| What are the different instruments in the foreign exchange market? |
|
Definition
Spot contracts
Forward Contract |
|
|
Term
|
Definition
Spot contracts-agreement to deliver/take delivery of certain amount of foreign currency immediately
*Spot Rate is the exchange rate for the contract* |
|
|
Term
| What is a forward contract? |
|
Definition
Forward Contract-Agreement to deliver/take delivery of certain amount of foreign currency in the future
*Key Aspect*When contract is made today, payment and delivery is in the future but today's exchange rate is locked on day of deal |
|
|
Term
| What are some uses of a foreign exchange market? |
|
Definition
1.Settlement of international trade of foreign debt by transferring purchasing power from one currency to another
2.Arbitrage-Taking advantage of exchange rate discrepancies to earn a *riskless* profit
3.Hedging-transaction in forward market designed to minimize potential loss from exchange rate fluctuation |
|
|
Term
| What are the different types of arbitrage? |
|
Definition
Locational-disequalibrium of exchange rates among regional banks
Three Point-disequilibrium among different foreign exchange markets |
|
|
