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Glossary

A

believes are being dumped into its markets from abroad

through the adjustments in economic variables

absorption approach

an approach to

currency depreciation that deals with the income effects of depreciation; a decrease in domestic expenditures relative to income must occur for depreciation to promote payments equilibrium, according to the absorp- tion approach

adjustable pegged exchange rates system of semifixed exchange rates where it is understood that the par value of the currency will be changed occasionally in response to changing economic conditions a

adjustment mechanism

a mecha-

nism that works to return a balance

of payments to equilibrium

after the

initial equilibrium

has been disrupted;

the process takes

two different forms:

automatic (economic processes) and discretionary (government policies)

ad valorem tariff

a tariff expressed as

a fixed percentage of the value of the imported product

advanced nations include those of North America and Western Europe, plus Australia, New Zealand, and Japan

agglomeration

economies

a rich

country specializes in manufacturing

appreciation

(as applied to currency

markets) when, over time, it takes fewer units of a nations currency to purchase

one unit of a foreign currency

Asia-Pacific Economic Cooperation

(APEC)

includes Australia, Brunei,

Canada, Chile, China, Indonesia, Japan, Malaysis, Mexico, New Zealand, Paupua New Guinea, the Phillippines,

Peru, Russia, Singapore, South Korea, Taiwan, Thailand, the United States, and Vietnam; in 1993, leaders of the APEC countries put forth their vision of an Asia-Pacific economic community in which barriers to trade and investment in the region would be eliminated by the year 2020

ask price

the price at which the

trader

is willing to sell a currency in

exchange for another currency

asset-market approach

a method of

determining short-term exchange rates where investors consider two key fac- tors when deciding between domestic and foreign investments; relative levels of interest rates and expected changes in the exchange rate itself over the term

of the investment

B

balance of international

indebtedness

a statement that

summarizes a countrys stock of assets

and liabilities against the rest of the world at a fixed point in time

balance

of payments

a record

of the

flow of economic transactions between

the residents of one country and the rest of the world

basis for trade

why nations export

and import certain products

beggar-thy-neighbor

policy

the

practice

of imposing protectionist

policies to achieve gains from trade

at the expense of other nations

Benelux

a cusoms union formed in

1948 that includes Belgium, the Neth-

erlands, and Luxembourg

bid rate

the price that the bank is

willing to pay for a unit of foreign currency

bonded warehouse

a storage facility

operated under the lock and key of (in the case of the United States) the U.S. Customs Service

niches and

gains productivity through

autarky

a case of national

brain drain

emigration of highly

groups

of firms clustered

together,

self-sufficiency

or absence of trade

educated

and skilled

people from

some producing

the same product

and

others connected

by vertical

linkages

antidumping duty against commodities

a duty levied a home nation

automatic adjustment

(of the

balance-of-payments process) a mech- anism that works to return a balance of payments to equilibrium automatically

developing nations to industrial nations

Bretton Woods system

a new inter-

national monetary system created in 1944 by delegates from 44 member

535

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