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Unformatted text preview: Chapter 5 1. Comparative advantage a. Domestic comparative advantage b. Nation can produce a product at a lower domestic opportunity cost then a tradeing partner 2. Terms of trade a. Trading agreements that are mutually beneficial b. Get more bang for buck by importing items not normally gotten and exporting items easily gotten 3. Foreign exchange market a. Market where various national currencies are being traded for others 4. Exchange rates a. The equilibrium in the foreign exchange market 5. Depreciation a. When the price of the native currency drops b. Takes 2$ = 1 Euro (as opposed to 1:1) 6. Appreciation a. When price of native currency increases b. Takes 1$ = 2 Euro 7. Protective tariffs a. Taxes put on imported goods to protect domestic produces form foreign competition i. Shifts demand toward domestic 8. Import quotas a. Limits on number of a specific item that may be imported 9. Nontariff barriers a. Unreasonable standards of product quality, testing b. Bureaucratic hurdles c.c....
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