Level 49
Level 50

International Political Economy

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Comparative Advantage
Ability of a country to produce a product at a lower opportunity cost than another country
opportunity cost
how much of a good do you forgo to produce the other good
Absolute Advantage
Ability of one country to produce more output per unit of input than any other country
Hecksher-Ohlin trade theory
The idea that a country's comparative advantage lies in producing goods that make intensive use of relatively abundant factors of production. For example, China succeeds in producing labor-intensive manufactured goods, which makes use of its abundant supply of labor.
A government policy during the second half of the 1800s and into the early 1900s that involved the control of people's lives and removal of indigenous people from their traditional lands into reserves or missions
trade barriers
Any government limitation on the international exchange of goods. Examples include tariffs, quantitative restrictions (quotas), import licenses, requirements that governments buy only domestically produced goods and health and safety standards that discriminate against foreign goods.
A government tax on imports or exports
Are limits on the quantity of imports allowed in a country
nontariff barriers to trade
Legal restriction that indirectly limits trade
Stolper-Samuelson theorem
Trade protection benefits the scarce factor of production and harms the abundant factor
Ricardo-Viner model
Preferences over trade policy vary by economic sector, not by factor of production or class. For example, although they may be from a labor-abundant country, workers in a steel plant facing foreign competition will f…
When countries return the favor of a concession
most favored nation status
A status established by most modern trade agreements guaranteeing that the signatories will extend to each other any favorable trading terms offered in agreements with third parties
World Trade Organization
An international institution for the negotiated liberalization of world trade. It replaced the GATT in 1994.
General Agreement on Tariffs and Trade
a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions
portfolio investment
Liquid forms of investment for which the investor forgoes a management role: bonds, loans, equity.
sovereign lending
Loans to a foreign government, which carry the added risk of default by the self-governing debtor.
foreign direct investment
Investment and corresponding management control by a corporation in a foreign affiliate, through a merger, acquisition, or greenfield investment.
World Bank
A specialized agency of the united nations, to assist European postwar recovery the initial role was absorbed by the marshal law plan. the focus then shifted (1949) to loans & technical assistance.
A sharp slowdown in the rate of economic growth and economic activity.
A severe downturn in the business cycle, typically associated with a major decline in economic activity, production, and investment; a severe contraction of credit; and sustained high unemployment.
To fail to make payments on a debt.
International Monetary Fund
Its mandate was to promote international monetary cooperation and exchange stability.
multinational corporation
An enterprise that operates in a number of countries, with production or service facilities outside its country of origin.
bilateral investment treaty
An agreement between two countries about the conditions for private investment across borders. Most BITs include provisions to protect an investment from government discrimination or expropriation without compensation, as well as establishing mechanisms to resolve disputes.
exchange rate
The price of one currency to another.
When a currency gains value against another currency in international markets.
When a currency loses value against another currency in international markets.
When monetary authorities declare a new, decreased value for their currency.
monetary policy
Government's attempts to use its control of the money supply to achieve macroeconomic goals.
Fixed Exchange Rate
An aspect of a monetary regime in which foreign currency values are pegged to a common currency, like the U.S. dollar.
Gold Standard
A fixed exchange system under which currencies of participating countries are convertible into an agreed-upon amount of gold.
Floating Exchange Rate
An aspect of a monetary regime in which foreign currency values vary relative to each other in response to supply and demand in currency markets.
Bretton Woods monetary system
a 1944 conference where the victors of World War II (principally the United States and the United Kingdom) created international economic institutions which have lasted in some form until the present day. In term…
adjustable peg
A monetary system of fixed but adjustable rates. Governments are expected to keep their currencies fixed for extensive periods but are permitted to adjust the exchange rate from time to time as economic conditions change.
international monetary regime
The set of formal or informal arrangements that a group of countries abide by in coordinating their monetary policies.
less developed countries
In general, countries that are poorer than those of Western Europe, Japan, and the United States. Specifically, LDCs are countries that need to import capital to develop economically.
Features of the Roman Empire
primary products
Agricultural goods and raw materials (such as minerals) before they are processed into more refined inputs or finished goods.
Characterizing an industry whose markets are dominated by a few firms.
terms of trade
The difference between changes in the prices of a country's imports and changes in the price of its exports. When the price of imports is increasing while the price of exports drops, the countr…
import substituting industrialization
A set of policies, pursued by most developing countries from the 1930s through the 1980s, to reduce imports and encourage domestic manufacturing, often through trade barriers, subsidies to manufacturing, and state ownership of basic industries.
export-oriented industrialization
A set of policies, originally pursued starting in the late 1960s by several East Asian countries, to spur manufacturing for export, often through subsidies and incentives for export production.
Washington Consensus
a set of economic liberalization policies favored by international investors, the IMF, and the U.S. Treasury Department as a means of creating economic growth in LDCs. By the early 1990s, these actors agreed …
Group of 77
A bloc of LDCs that cooperates in international economic institutions such as the World Trade Organization. Currently, the G-77 has well over 100 members.
New International Economic Order
An unsuccessful 1970s proposal by LDCs to implement restrictions on foreign direct investment globally, increasing profitability for primary goods and other measures to redistribute income to poor countries.
commodity cartels
An organization of producers who attempt to restrict collective supply of a good in order to raise its price. OPEC is the most successful example.
Level 51