OFL Economics Unit 5 – Flashcards
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direct foreign investment
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the purchase by foreigners of real estate and businesses in other countries
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foreign affiliates
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branches of multinational firms
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import quota
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restriction imposed on the number of units of a particular good that can be brought into the country
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devaluation
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lowering a currency's value in relation to other currencies by government order
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depreciation
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fall in the price of a currency through the action of supply and demand
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bureaucracies
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offices and agencies of the government that each deal with a specific area
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stagflation
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combination of inflation and low economic activity
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European Union
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organization of European nations whose goal is to encourage economic integration as a single market
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monetarism
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theory that deals with the relationship between the amount of money the Fed places in circulation and the level of activity in the economy
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underground economy
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transactions by people who do not follow federal and state laws with respect to reporting earnings
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economics politics protect a nations own security
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reason for giving foreign aid
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Why do we need a system of currency exchange rates
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to engage in international trade
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imports
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Goods bought from other countries for domestic use
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exports
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Goods sold to other countries for use
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evidence that China is moving toward capitalism
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China has begun to abandon central planning in favor of more local control of the economy
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regional cross-border investments
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countries investing in other countries for the good of their geographical region
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types of foreign aid
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funds goods services
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Milton Friedman
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economist that is linked to monetarism
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Karl Marx
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Communism
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revenue tariff
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a tax on imports used primarily to raise government revenue without restricting imports
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Types of unemployment
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cyclical structural seasonal
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the price of one nation's currency in terms of another nation's currency.
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exchange rate
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through embargoes, tariffs, and quotas.
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How can a nation restrict imports
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How many members of the WTO (world trade organizations) are there as of 2007
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140 members
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cyclical, structural, seasonal, and frictional
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What are the 4 types of unemployment?
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the ability to import the things that we want from international trade
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What does the US gain from international trade?
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they allow for conversions of one currency to another
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Why are foreign exchange markets necessary?
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with tariffs, quotas, and embargoes
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How can a nation restrict import?
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a revenue tariff is used to raise government revenue without restricting imports. a protective tariff is used to raise the costs of imported goods and thereby protect domestic producers
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What is the difference between a revenue tariff and a protective tariff?
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a complete restriction on the import or export of a particular good/goods going or coming from a specific country
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What is an embargo?
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North American Free Trade Agreement
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What does NAFTA stand for?
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stocks, bonds, and money
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What kinds of financial investments are traded in global markets?
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they think the rate of return is higher than elsewhere
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Why do foreigners purchase United States government securities?
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the European Union because they make more foreign investments in Western Europe than anywhere else
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What is an example of a cross-border investment?
