{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

IRN test 3 - Balance of trade deficitA situation that...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Balance of trade deficit- A situation that results when a state buys more from abroad than it sells. The balance measures both the value of merchandise goods and services imported and exported. To correct a payments deficit, a country has available three basic options. 1- its government can initiate deflationary policies at home by raising interest rates to tighten budgets; 2- it can restrict the outflow of money by imposing higher tariffs, import quotas, or other restrictions; 3- it can borrow in capital markets or liquidate its foreign exchange reserves. Balance of Payments- A calculation summarizing a country’s financial transactions with the external world, determined by the level of credits (export earnings, profits from foreign investment, etc) minus the country’s international debts (imports, interest payments, etc). A favorable balance of payment is achieved when a country’s international credits exceed its national debts. Devaluation- the lowering of the official exchange rate of one country’s currency relative to the value of all other state’s currencies, usually in hope that the devaluation will encourage foreign investors to purchase products at the artificially reduced price. Protectionism- A policy of creating barriers to foreign trade, such as tariffs and quotas, that protect local industries from competition. A number of mercantilist policies to keep foreign goods out of a country and to subsidize the export of goods to encourage foreigners to buy domestically produced goods. Reasons: National Security (military goods, etc.), Future Economic Growth (American firms made to help Americans, NIEs with prospects of growth in a poor economy), Adjust to New Competitors (government intervenes on their behalf, government intervened when Japanese competition was overwhelming Detroit, so government intervened with VERs), and Democratic Politics (says that states have ability to pursue whatever their interests are. States want to protect their national well being. Beggar-thy neighbor policies- Seek to enhance domestic welfare by promoting trade surpluses that can be realized only at other countries’ expense. They reflect a government’s efforts to reduce unemployment through currency devaluations, tariffs, quotas, export subsidies, and other strategies to adversely affect trade partners. These strategies seek unequal exchanges between exporters and importers. Import quotas- Specify the quantity of a particular product that can be imported from abroad. In the late 1950s, the United States established import quotas on oil to protect national security. The government determines amount and source of imports, not the marketplace. Export quotas- Result from negotiated agreements between producers and consumers that restrict the flow of goods from the producer to the consumer. An Orderly Market Arrangement (OMA) is a formal agreement where a country agrees to limit their exports that might impair workers in the importing countries. Exporting countries will accept these restrictions for concessions on other fronts. For example: the Multi-Fiber
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern