Campbell R. McConnell,
University of Nebraska, Lincoln
Stanley L. Brue,
Pacific Lutheran University
Thomas P. Barbiero,
Ryerson University
| Absolute advantage | When a given amount of resources can produce more of a commodity in one country than in another.
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| Appreciation (of the dollar) | An increase in the value of the dollar relative to the currency of another nation so that a dollar buys a larger amount of the foreign currency and thus of foreign goods.
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| Comparative advantage | A lower relative or comparative cost than another producer.
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| Depreciation (of the dollar) | A decrease in the value of the dollar relative to another currency so that a dollar buys a smaller amount of the foreign currency and therefore of foreign goods.
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| Euro | The common currency unit used by 12 European nations in the Euro zone, which includes all nations of the European Union except Great Britain, Denmark, and Sweden.
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| European Union (EU) | An association of 15 European nations that has eliminated tariffs and import quotas among them, established common tariffs for goods imported from outside the member nations, allowed the free movement of labour and capital among them, and created other common economic policies. Includes Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and Sweden.
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| Exchange rate | The rate of exchange of one nation's currency for another nation's currency.
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| Export subsidies | Government payments to domestic producers to enable them to reduce the price of a good or service to foreign buyers.
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| Foreign exchange market | A market in which the money (currency) of one nation can be used to purchase (can be exchanged for) the money of another nation.
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| General Agreement on Tariffs and Trade (GATT) | The international agreement reached in 1947 in which 23 nations agreed to give equal and nondiscriminatory treatment to the other nations, to reduce tariff rates by multinational negotiations, and to eliminate import quotas. Now includes most nations and has become the World Trade Organization.
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| Import quota | A limit imposed by a nation on the quantity (or total value) of a good that may be imported during some period of time.
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| Most-favoured-nation (MFN) clause | An agreement by Canada to allow some other nation's exports into Canada at the lowest tariff level levied by Canada, then or at any later time.
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| Multinational corporation | A firm that owns production facilities in other countries and produces and sells its product abroad.
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| Non-tariff barriers | All barriers other than protective tariffs that nations erect to impede international trade, including import quotas, licensing requirements, unreasonable product quality standards, unnecessary red tape in customs procedures, and so on.
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| North American Free Trade Agreement (NAFTA) | A 1993 agree ment establishing, over a 15-year period, a free trade zone composed of Canada, Mexico, and the United States.
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| Protective tariff | A tariff designed to shield domestic producers of a good or service from the competition of foreign producers.
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| Terms of trade | The rate at which units of one product can be exchanged for units of another product; the price of a good or service; the amount of one good or service that must be given up to obtain one unit of another good or service.
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| Trade bloc | A group of nations that lower or abolish trade barriers among members. Examples include the European Union and the nations of the North American Free Trade Agreement.
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| World Trade Organization | An organization established in 1994, replacing GATT, to oversee the provisions of the Uruguay Round and resolve any disputes stemming therefrom.
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2002 McGraw-Hill Higher Education