Terms: Chapter 2

Here are the terms from Chapter 2 of the text. Even though I skipped over it in class, I do want you to know WTO. (You know that quiz is coming!).

2.1.  Balance of payments (also balance of trade) is the difference in value, over a period of time, between a country’s imports and exports.

Imp.  When gains from exports exceed imports, a country grows richer, and vice versa [when the costs from imports exceed exports, a country grows poorer.]

2.2.  Protectionism STOPS unwanted products from other countries.

Imp.  Among the 11 reasons . . . protectionism protects infant industries, keeps money at home, maintains a standard of living, maintains high employment, and helps national defense.

2.3.  Trade barriers SLOW unwanted products from other countries. 

Imp.  Trade barriers exist and protect local industry.

2.4  Tariffs are a tax imposed by a government on goods entering at its borders.

Imp.  Tariffs generate revenue; they also discourage the importation of goods.

2.5  GATT was formed after WWII to reduce tariffs and serve as a watchdog over world trade.

Imp. Offers nations a forum for negotiating trade and related issues. Decisions are not binding.

2.6  World Trade Organization is an institution, not an agreement, that sets rules for governing trade among 148 member countries.

Imp. Hears and rules on trade disputes and unlike GATT it issues binding decisions.