International Economics Test Questions and Answers
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Course
International Economics
Institution
International Economics
International Economics Test Questions and Answers
infant industry argument - Answer-The argument that new industries should be protected from foreign competition until they are large enough to achieve economies of scale that will allow them to be competitive.
international reserves - Answer-F...
International Economics Test Questions
and Answers
infant industry argument - Answer-The argument that new industries should be
protected from foreign competition until they are large enough to achieve economies of
scale that will allow them to be competitive.
international reserves - Answer-Foreign currencies held by governments (central banks)
as a result of international trade. Reserves may be held so that the government may
maintain a desired exchange rate for the country's currencies.
J-curve - Answer-Suggests that in the short term, a fall in the value of the currency will
lead to a worsening of the current account deficit, before things improve in the long
term.
Marshall-Lerner condition - Answer-States that a depreciation, or devaluation, of a
currency will only lead to an improvement in the current account balance if the elasticity
of demand for exports plus the elasticity of demand for imports is greater than one.
overvalued currency - Answer-When the value of a currency is believed to be higher
than what is perceived to be its market equilibrium value, based on its balance of
payments position or its international purchasing power.
Preferential trade agreement - Answer-Where a country agrees to give preferential
access, e.g. reduced tariffs, to certain products from one or more trading partners.
quota - Answer-Import barriers that set limits on the quantity or value of imports that
may be imported into a country.
retaliatory tariff - Answer-Where a country responds to the imposition of a tariff by a
trading partner by imposing a tariff on that country's products.
revaluation - Answer-An increase in the value of a country's currency in a fixed
exchange rate system.
speculation (in the context of exchange rates) - Answer-Where foreign currency traders
make a decision to buy or sell a currency based on their expectations of future
exchange rate movements.
subsidy (in the context of international trade) - Answer-An amount of money paid by the
government to a firm, per unit of output, to encourage output and to give the firm an
advantage over foreign competition.
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